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1. Standardised approach
2. Standard Approach
• Tier 2 capital ~~ 2%
Provisioning Norms
Standard assets ~ 0. 40%
Direct Agriculture / SME~ 0.25%
Advance to other sectors – personal loans, home loan > Rs 20
lakhs, commercial real estate loans, capital market exposure ~
2%
Loss assets
100% of the outstanding balance
Credit
Interest rate
Exchange rate
Risk Management
commodities
Liquidity
Legal, regulatory and operational aspects
Competition/ Market risk
Technology risk
Financial risk
Economic / Political risk
Risk Management
Key functions of risk management
Risk analysis
Investment and pricing decisions
Risk quantification
Risk monitoring and reporting
Strategic advisor
Solvency – bank capital required to absorb an unexpected
loss
Risk Management
Key functions of risk management
Risk analysis
Investment and pricing decisions
Risk quantification
Risk monitoring and reporting
Strategic advisor
Solvency – bank capital required to absorb an unexpected
loss
Risk Management
Risk Treatment
Risk avoidance
Risk reduction or mitigation
Risk acceptance
Risk transfer
Operational risk management
It aims at reducing the number of events and limiting the
losses on big events. It consists of assessment and loss
management.
Risk Management and Credit Rating
As per Basel 2 , borrowers and facilities must have their ratings
refreshed at least on an annual basis
• When the GAP is negative, the bank has more RSLs than RSAs
across time interval. Such a bank is termed ‘liability sensitive’.