major risks for international banks

Topics: Bank, Risk, Bank run Pages: 5 (1572 words) Published: December 5, 2013


Abstract
This report indicates the major risks facing international banks, such as: credit risk, liquidity risk, systemic risk, interestrate risk, political risk, market risk and operational risk. While each of them is considered to be manageable,together they represent a clear and present danger to the international banking system.

Contents

Contents………..……………...……...……………………….…..……….. 2 Introduction………….....………..…….……………..…….…..….……….. 3 International banking risks
Internal risks that facing a global bank........................................................4 Operational risk.............................................................................................4 System Risk....................................................................................................4 Liquidity risk...................................................................................................5

External Risks
Market risk.....................................................................................................5 Political risk....................................................................................................6 Interest rate risk.............................................................................................6

Conclusion......................................................................................................7

Introduction
The concept of international banking system confronted several obstacles across all markets to finally reach the today’s level. In the beginning, it has to face the fact that each nation was in a different economic phase (underdeveloped, emerging and developed economies). The relation between financial development and banking grows, referring that much of the countries’ development happened in accordance to banks' ability to provide trade financing, credit, and foreign exchange services, activities specifically designed to overcome many of the impediments to conducting trade and investment transactions that cross political and economic borders. There are many ways which banks develop globalization through their operations. First of all, national banks join partnerships with local banks abroad seeking to access clientele from other countries. Such tools are lending and borrowing money. When banks lend to each other globally, these loans are draining throughout corporate and individual customers among countries, whilst it is very common for banks to raise funds internationally for their operations through borrowing. Conventionally, banks have used the deposits they received from their customers to fund their lending activities. As it seems by the aforementioned facts, banks have to continuously strengthen their global position so as to become more competitive. Analysts referred that such an increased competition, followed by rigorous capital adequacy requirements in the banking industry, often lead to riskier bank behaviors. For example, when banks have to choose between making higher profits and tolerating a higher risk of failure, they usually decide to worsen the quality of theirs loan portfolio. However, maintaining a high level of meager loans in a bank portfolio threatens banks’ lending opportunities to a very large extent. Moreover, all banks regardless of their type are identical in nature and exposed to the same form of risks, meaning that the failure of one bank affects the others. Thus, it seems quite logical why today’s global banking system concerns about risks and seeks ways to deal with them. This report discusses the most major risks facing the global banking industry and focuses on the various ways which banks implement or should implement to control these risks. International Banking Risks

Internal risks that facing a global bank:
Operational risk
Operational risks comprise of risks not included under the previous categories, but are still faced by the...
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