Other bank risks
Category: Bank Management
Market risks
The main function of banks on the markets (financial, currencies, derivatives, etc.) is to intervene on behalf of their customers: so the risk remains risk one customer.
But, in order to increase its profitability and thanks to the ability and technical competence of its staff, a bank can operate on its own. To avoid heavy losses, General Management must set up operating rules, strict limits for every type of operation and a control system.
The expression Market risk means different types of risks (exchange, rates, delivery, etc.)
Administrative and accounting risks
The accounting systems in a bank are characterised by a great number of operations, a permanent access to the accounts by any employee and complicated circuits
Different types of risks can arise:
mistake in the writing of the application
mistake in the entry of an operation
raud
loss of means of payment
loss of documents
To limit risks the following issues will have to be addressed:
— authorisation
— execution
— control
d) Every account should be justified and controlled at any time if necessary.
Data Processing Risks
The data system is an information tool but also a production tool.
— risks: destruction or loss of data base
mistake in the choice of costly equipment
loss or change in an audit track
fraud
— controls: reserved access to the room
protection of data-base
back up with another company
sorting out of the operations
good information on the programmes
limited access to computer
This credit institution backs a large amount of its long term liabilities using short term resources.
Transformation is 140 — 80 = 60
The ratio of capital stock and permanent resources is not respected: 60/120 = 50 %.
This credit institution has insufficient long term resources.