ChA1: Banking overview Flashcards
Types of banks
Commercial banks
* Usually public companies
* Services such as accepting deposits, providing loans…
Development banks
* Usually supported by government and focuses on large projects within public and private sectors
Central banks
* Government bank of the country
* Implement inflation targeting and monetary policy
Investment banks
* Assists companies and government with facilitating funding
* Debt raising and equity financing
Community banks
* Membership based and desentralised
* Stokvels
Key risks for banks
Credit risk
* Failure of counterparty
* Concentration risk amplifies credit risk
Market risk
* Volatility risk
* Currency risk
* Basis risk - risk exposure is hedged with offetting exposure but does not behave in identical manner
* Interest rate riks
* Liquidity risk
* Commodity price risk
Operational risk
* Internal processes
* People
* Systems
* External events
Liquidity risk
Other risks: Business strategic, pre-payment, model risk, country risk, duration risk
