Credit risk for financial institutions: what you should know [Blog post]

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Bace, E. 2018. Credit risk for financial institutions: what you should know [Blog post]. Bloomberg Exam Prep - CFA Program.
TitleCredit risk for financial institutions: what you should know [Blog post]
AuthorsBace, E.
Abstract

Risk management is an important feature of the CFA® exams. Since many candidates work for or aspire to work for banks, an understanding of credit risk is critical, simply because credit risk is the main risk-exposure element of the vast majority of banks in any country. Take a look, for example, at the following extract from the banking book of an Austrian regional bank, with a balance sheet around EUR 10,000,000,000. It shows its November 2014 regulatory capital requirement breakdown:
* Credit risk: 92%
* Other: 1%
* Operational risk: 1%
* Market risk: 6%
This shows credit risk to be the highest material risk exposure on the balance sheet. This is by no means an extreme example, and amply illustrates the point.

Research GroupCentre for Enterprise, Environment and Development Research (CEEDR)
Corporate Social Responsibility and Business Ethics group
International Business group
International and Cross-cultural Management group
Journal or PublicationBloomberg CFA
Publisher or commissioning bodyBloomberg Exam Prep - CFA Program
Publication dates
Online07 Mar 2018
Publication process dates
Deposited28 Oct 2019
Accepted01 Mar 2018
Output statusPublished
Copyright Statement

© 2016-2019 Bloomberg Exam Prep

Web address (URL)https://www.bloombergprep.com/blog-posts/2018/3/7/xjqebrhkzip9zi78ull8dvg91q6488
LanguageEnglish
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