Strategic Banking Operations Flashcards
Why were the Basel Accords (I,II,II,IV) introduced?
to standardize banking regulations
What are some types of risks banks face?
- Credit Risk – Customers failing to repay loans.
- Market Risk – Losses due to market fluctuations.
- Liquidity Risk – Inability to meet financial obligations.
- Operational Risk – Internal failures like fraud or system breakdowns.
- Reputational Risk – Negative public perception.
What are some limitations of the balance sheet?
- It doesn’t reveal asset quality, risk exposures, or industry concentrations.
- Some banks may appear strong but have hidden weaknesses (e.g., non-performing loans).
What is liquidity?
It is the bank’s ability to access cash to meet obligations
What are some sources of liquidity?
- Deposits
- Loan repayments
- Borrowings from other banks
- Central Bank assistance
- Securitization (selling assets for cash)
What are some of Ghana’s sustainable banking principles?
- Environmental & Social Risk Management (ESRM)
- ESG in Bank Operations
- Corporate Governance & Ethics
- Gender Equality
- Financial Inclusion
- Resource Efficiency & Sustainable Consumption
- Reporting & Transparency
What are some international sustainability frameworks?
- Equator Principles – Risk management for project financing.
- UNEP FI – Encourages financial institutions to adopt sustainability practices.
- IFC Performance Standards – Guidelines for responsible banking investments.
What are the various categories of loans according to their credit risk?
- High Risk (Category A) – Major environmental/social impact (e.g., mining, oil & gas).
- Medium Risk (Category B) – Some environmental/social impact (e.g., cement, textile).
- Low Risk (Category C) – Minimal impact (e.g., software development, consulting).
What are the key functions of a bank?
Accepting deposits, lending money, facilitating payments, providing financial advice, and managing risks.
Why are banks highly regulated compared to other firms?
Due to their role in financial stability, managing public funds, and preventing systemic risks.
What is the significance of the Basel Accords in banking?
They establish international banking regulations to ensure financial stability and risk management.
What is credit risk, and how can banks mitigate it?
The risk of borrowers defaulting on loans; mitigated through credit scoring, collateral, and risk assessment.
What is liquidity risk, and what are its sources?
The risk of not meeting short-term obligations; sources include deposits, loan repayments, and borrowings.
Why is a mismatch between assets and liabilities dangerous for a bank?
It can lead to liquidity crises if short-term liabilities fund long-term assets.
How does the balance sheet reflect a bank’s financial stability?
It shows the bank’s assets, liabilities, capital structure, and liquidity position.
How does the Equator Principles framework support responsible banking?
It provides guidelines for assessing environmental and social risks in project finance.
What is the role of the IFC Performance Standards in risk management?
They guide banks in managing environmental and social risks in investments
Who monitors banks to ensure sustainable and ethical practices?
Regulators, NGOs, investors, media, and international organizations.
Why is financial inclusion important in sustainable banking?
It promotes economic development by providing financial services to underserved populations.
