Risk is a natural element of banking business. It is a condition that raises the chance of losses and uncertain potential events which could manipulate the success of the financial institutions. The uncertain future events could include disappointment of a borrower to pay back a credit, variation of foreign trade rates, fraud, non-compliance with laws and principles and other actions due to the failure of the bank (Khan & Ahmed, 2001; Meyer, 2000; Khalid & Amjad, 2012). As Khalid & Amjad (2012) noted commercial banks are in the risk business. In the process of providing financial services, they assume various kinds of financial risks.
The Cause of Euro Crisis The Eurozone crisis was triggered by a combination of some complex factors that can be traced as far back as 2002. Seth et al (2011) and Mourlon-Druol (2011) listed some of the factors as; • high-risk lending and borrowing caused by the extremely easy credit conditions that characterized the Eurozone financial sectors between 2002 and 3008; • globalization of financial; • the Great Recession of 2008-2012; • international trade imbalances; • governments’ fiscal policy choices; • methods adopted by states for bail-out of troubled banking institutions and private bondholders; • private debt burdens; • real estate bubbles or socializing losses etc The origin of the crisis can be traced to the early 2000s when some
How did the existence of BofA’s mission and business strategy help the firm move quickly in acquiring Countrywide? Overall BofA was looking to be one of the largest bank in U.S. Their strategy was acquired the most important banks which provided financial services. Acquired Countrywide gave them the access to a huge customer portfolio in the mortgage area since this bank was one of the biggest providers of loan closing services, such as appraisals and flood determinations; and other residential real estate–related services. In addition, a considerable tax saving to Bof
Financial market developments in the past decade have increased the complexity of liquidity risk and its management. The fundamental role of banks in the maturity transformation of short-term deposits into long-term loans makes banks inherently vulnerable to liquidity risk, both of an institution-specific nature and that which affects markets as a whole. Banks deal with public deposits and hence the confidence of the public is very important for them to continue their operations. Banks’ major profit comes from lending operation. In the changing scenario, when the entire deposit portfolio has become payable on demand, it is very important for the banks to maintain sufficient liquidity.
The core business of the retail banking industry and the banking industry as a whole involves taking risks mainly when offering credit facilities to borrowers. It is for this reason that the risk taking behavior of a bank will always have an impact on the bank’s profitability and ultimately on whether or not the bank remains a going concern. This is despite that in a number of countries the non-interest income on banks is growing in importance; after-all loans constitute the largest share of bank’s assets. Over the years there has been a significant amount of research on the effects of competition on the risk taking behavior of banks and hence their stability. This has been coupled with inquiries by different competition authorities around
Secondly, sometimes the risk of hedge funds relate to their structure such as fraud. The most usual example of fraud is that managers lie about the nature or the value of their investment (Coggan 2009). Finally, the another worry about hedge funds is bring the system down. What this means is that hedge funds haven’t ability to repay the money they borrow when they make a bad bet. If hedge funds managers borrow money from bank, it may lead bank lost a lot of money.
Introduction Banks and other financial institutions plays an active role in meeting the financial needs of individuals and corporate entities. One of the principal activities performed by banks is to serve as intermediary between lenders and borrowers. Indeed, banking can be said to thrive principally on intermediation which is the process of lending money out to borrowers at a relatively high rate compared to the deposit interest rate. However, some conditions subsist that leads to the erosion of this role performed by banks and this is referred to as disintermediation. In the general sense, disintermediation refers to a situation where the activities of middlemen are avoided in the course of a transaction.
5. To examine the problems of respondents based on information collected from Bank Customers’, Bank Officials and different secondary sources, 6. To compare and analyze the problems of respondents between private and public sectors banks and; 7. To examine the problems by taking respondents’ views and suggest various measures to improve the banking services and marketing strategies of banks. 1.4 NEED OF THE STUDY: India being the largest economy in the world having more than 128 crore of population, the good governance of banking system has a significant demand of customers
Commercial banks depend on artificial precepts and concentrate on maximization of earnings. The necessary function of commercial banking is lending money and re-embrace with high interest including profit. Commercial banks are in surplus than Islamic banks that don’t share profit and loss with
Futures Smirlock (n.d.) stated that bank often offers floating rate loan, however this kind of loan might consists higher risk as they do not eliminate interest rate risk. This might causes the risk to transfer from the lender to the borrower, which might cause severe problem for the bank itself. Since floating rate loan fluctuate with interest rate and can have a significant impact on the cash flow of the customer, it ought to be much more risky than fixed rate loan. As a result, bank might lost not only the customers’ loan businesses but also the firm’s other banking businesses. Interest rate risk is one of the most important forms of risk that banks face in their role as financial intermediaries (Hirtle, 1996).