Liquidity risk

7:30 AM    

Liquidity risk is defined as existing or potential risk to earnings and capital, which arises from the inability of the bank to meet its obligations in due time, not having suffered with unacceptable losses. Liquidity risk arises from the inability to manage unplanned outflow of funds, changes in funding sources and / or take off-balance sheet commitments. Allocate the risk of market liquidity, which is defined as existing or potential risk to earnings and capital, which arises from the inability of the bank to quickly close the gaps of their positions at current market rates, not having suffered with unacceptable costs. Market liquidity risk arises from the inability to identify or take into account changes in market conditions affecting the ability to raise funds in the required quantities and at reasonable rates and / or sell assets quickly and with minimum loss of value. Interest rate risk - this is an existing or potential risk to earnings or capital arising from adverse changes in interest rates. This risk affects both the profitability of the bank and the economic value of its assets, liabilities and off-balance sheet instruments. The main types of interest rate risk, which are usually incurred by the bank are: - The risk that the value of resources that arises from differences in the maturity (for instruments with a fixed interest rate) and the revaluation of values ​​of interest (for instruments with variable interest rates) bank assets, liabilities and off-balance sheet items - risk of changes in the yield curve, which is due to changes in the slope and shape of the yield curve - basis risk arising from the lack of sufficiently close relationship between the adjusted rates received and paid for the various instruments all other characteristics are identical for revaluation - the right to choose risk that arises from having the right to refuse to perform the contract (ie, the right choice), which directly or indirectly present in many bank assets, liabilities and off-balance sheet portfolios . Topic: Risks in Banking