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8 Risks in the Banking Industry Faced by Every Bank

The financial industry in the US is the most liquid and the largest market in the world. In 2014, finance and insurance represented 7.2 percent of U.S. GDP. The banking industry in the US supports the world’s largest economy with the greatest diversity in banking institutions and concentration of private credit. The banking industry has awakened to risk management, especially since the global crisis during 2007-08. But what are the day to day risks and the long term risks faced by banks? Why do dedicated risk management practices at companies like FIS Global even exist? Which risks are their risk management products and services meant for? Here’s the list of 8 risks faced by banks:

Credit risk According to the Bank for International Settlements (BIS), credit risk is defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Credit risk is most likely caused by loans, acceptances, interbank transactions, trade financing, foreign exchange transactions, financial futures, swaps, bonds, equities, options, and in the extension of commitments and guarantees, and the settlement of transactions. In simple words, if person A borrows loan from a bank and is not able to repay the loan because of inadequate income, loss in business, death, unwillingness or any other reasons, ...

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