risk management in banking 1. risk? risk uncertainty loss
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Risk Management in Banking
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Risk?
RiskUncertainty
Loss
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Finacial Statements of a Bank
• 1. Balace Sheet
• 2. Statement of Income
• 3. Cash Flow Statement
• 4.Retained Rearnings Statement
• (as of 31.12.2014)
• ( for the year ending 31.12.2014)
• ( for the year ending 31.12.2014)
• ( for the year ending 31.12.2014)
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Balance Sheet of a Bank
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Interest Earning AssetsInterest Bearing Liabilities
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Share Holders Equity
• 1. Share Capital• 2. Retained Earnings• 3. Revaluation Surplus• 4. Emission Premium• 5. Legal Reserves• 6. Net Income for the year
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Income Statement
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NonInterestIncome
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B/S & I/S Relationship
ALM bsenver@superonline.com 11
Balance Sheet Income StatementAssets Liabilities
Loans
Treasury Bills
Interest Income
Interest Expences
Net Interest Income
Deposits
BorrowingsInterest Earning Assests
Interest Bearing
Liabilities
Non-Interest Earning Assests
Non-Interest Bearing
Liabilities
Share HoldShare ers’ Equity
Total Assets Total Liabilities+SHEQ=
Share Holders Equity
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Sources of Banking Risks
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On Balance Sheet Risks
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OffBalance SheetRisks
Major Off Balance Sheet Risks of Turkish Banks
• Letter of Guarantees (Teminat Mektupları)• Letter of Credits (Akreditifler)• Guarantees Given for Foreign
Transactions (Harici Garantiler)• Cross Currency Swaps (Opsiyonlar-
Currency Opsiyonları)• Forward Transactions (Forward İşlemler)• Interest Rate Swaps (Faiz Swapları)
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CAMELS O
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1.1 unexpected withdrawal of deposits before maturity date1.2 unexpected non renewal of deposits at maturity date2.1 unexpected non payment of loan principle or interest amounts at due dates2.2 unexpected early payment of loans before maturity date3. Unexpected indemnification of Contingent Liabilities & Commitments like Letter of Gurantes or Letter of Credits
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Market Risks
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Interest Risks
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Position Risks in Banks
Operations Risks
Internal FraudExternal FraudPractices: - Employment - Client - Products - Business
Damage to AssetsBusiness DisruptionSystem Failures
ExecutionDelivery
ProcessManagement
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Operating Risks for non financial institutions
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BANKING RISKS BECOMING COMPLEX
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