Financial Risks Management of Risks
Institution
Commercial Bank Credit risk is the greatest Banks operate their loans
risk experienced by under well-defined
banks. This happens when credit requirements or
debt payments are not standards. Such criteria
fulfilled by borrowers. specify the credential
Loans, acceptances, qualifications of the
interbank loans, trade borrower, the intent of
borrowings, foreign the borrowing and the
exchange transactions, source of repayment.
equities, stocks, bonds, Furthermore, banks set
swaps and guarantees or clearly their approval
settlement of transactions criteria for new credits,
are the common possible renewals, refinancing, and
sources of credit risk. premature terminations
while setting an overall
credit limit for all
consumer loans.
Therefore, banks offer
loans to
individuals/businesses
with decent credit history.
How Affected by the
Pandemic
As the duration and severity
of this pandemic are
unknown, banks play a vital
role in ensuring that the
supply of funding is
adequate to fund individuals
and companies without
compromising their own
liquidity status. As a
consequence, if substantial
withdrawal of loan facilities
is needed, banks readjust
their current liquidity stress
models to cater for enough
resources. In addition, in
certain countries, credit risk
increases substantially,
especially in sectors or
regions around the world
that are hit the hardest by
the COVID-19 pandemic.