Definition This kind of risk is the core of the banking business which consists in granting a loan from collected funds. The interest rate risk anises when the cost of the resources is higher than the interest obtained from the loans.
Different kinds of risks Just like any company, credit institutions have to face many constraints; because of their type of activity and their economic role, three main constraints can influence their strategy.
Many activities can be found in this pole; they are managed outside the credit institution for financial, fiscal or juridical reasons. We can describe four of them.
International operations 1 Objectives may be different: To accompany their customers when they invest abroad To develop a standard banking activity
During the last ten years, economic evolutions, disintermediation, internationalization and technological evolutions have contributed to the development of market activities.
This function, totally dedicated to customers, relies on sales representatives and the branch network. It happens to be the core activity and the source of profitability of commercial banks.
Since banks have to manage the financial assets of their clients, a tight control of the treatment will consist in steering the flows and updating the stocks.
In industry, Data Processing is part of production whereas in banks it is the core of the whole production. So far, its development has gone through three stages: Starting: mechanisation, data registering Industrialisation: large systems
The number and the diversity of the operations imply strict execution procedures. One function can guide and even manage the projects of other functions in the bank and thus create synergies.
Generally, the marketing process in a bank has three different functions: — collection of information on the environment — financial objectives of the bank — possible evolution of market and consumer behaviour
