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.in senior management to defined risk management framework and integration risk management committee is responsible for implementation of the strategy and also the responsibility of risk management head.
Credit risk The borrower /client who are not to repay principal as well as interest in a given time is known as credit risk Sovereign credit risk If an institution or bank gives loan to a country government the risk to which they take is called sovereign credit risk, if they not repay principal and interest in a given time. in 2009 the bank give 4520 and in 2010 give 15981 which is so much huge amount as compare to 2009. Non sovereign credit risk If the loan is given to other corporation or banks which are not government own. Counter party credit risk on inter bank limits If a bank lend to other financial institution for short period and taking risk. in 2009 the bank lend 200268 and in 2010 the amount is 297608.
Portfolio risk measurement models Risk of portfolio should be less than the weighted average risk of the all individual securities
AB =
cov AB A B
Early warning system Not available Management of non performing loan Not available Portfolio diversification If a bank lend to different sector of economy i-e financial, agriculture, housing sector, government (risk free) called diversification of loan.
Market risk
When investors do same investment in securities and price change due to market factor i-e interest rate, foreign exchange rates, equity price and these assets are for resale purpose. Risk pertaining to trading book Interest rate risk-trading book Interest rate risk is that if interest rate changes by SBP then the opportunity cost of financial asset increase and rf rate also increase. if borrowing interest rate increase the cash flow decrease and its adversely effect the intrinsic value of that asset.
Equity position risk Not available Equity price risk It is the risk to capital/equity or earning from which the value of bank equity effect Concentration risk Not available Duration GAP analysis Market risk capital risk charge This means that how much capital is require for market risk Capital =amount of risk weighted asset x 8% Rs 000 2008 58597 2009 434253 2010 730242
Rs 000
7302413
Foreign exchange risk Risk occurs due to currency rate change or forex rate change for a bank and its impact banking asset and its liabilities.
Liquidity risk When bank have insufficient cash or liquidity to fulfill the customer needs of cash is called liquidity risk this is for deposits of clients for this bank have to kept some cash. Maturities of assets and liabilities Not available
Operational risk Any loss to bank from external events or internal system process or people. this risk are managed by certain framework policies tools and procedure. this is the responsibility of IRME to manage operational risk and exposure of operational risk. Off balance exposure Those item which are not in list of balance sheet of a bank.