What are the 3 primary risks that banks face?Question 5Select one:a.Market, Operations, Creditb.Credit, Liquidity and Interest Ratec.Interest rate, Sovereign, Default d.Interest Rate, Market, Operationse.Default, Liquidity, Operations
Question
What are the 3 primary risks that banks face?Question 5Select one:a.Market, Operations, Creditb.Credit, Liquidity and Interest Ratec.Interest rate, Sovereign, Default d.Interest Rate, Market, Operationse.Default, Liquidity, Operations
Solution
The three primary risks that banks face are: Credit, Liquidity, and Interest Rate. So, the correct answer is b. Credit, Liquidity and Interest Rate.
-
Credit Risk: This is the risk of default on a debt that may arise from a borrower failing to make required payments.
-
Liquidity Risk: This is the risk that a bank will not be able to meet its financial obligations as they come due, without incurring unacceptable losses.
-
Interest Rate Risk: This is the risk that a bank's financial condition will be adversely affected by movements in interest rates.
Similar Questions
As commercial banks move from their traditional banking activities of deposit taking and lending and shift more of their activities to trading, they are more subject to A.political risk.B.market risk.C.credit risk.D.sovereign risk.E.liquidity risk.
What type of risk does a bank undertake when it fears a borrower might default on a loan?Liquidity RiskOperational RiskCredit RiskMarket Risk
Banks are a concern for regulators because they have:Group of answer choicessystemic riskunsystematic risksystematic riskspecific risk
Which of the following is not a source of financial risk?A) Exchange rates B) Interest rates C) Market Share D) Credit Terms
Which of the following is NOT a potential cause of liquidity risk for a bank? A.A decrease in the availability of short-term borrowed funds.B.An increase in requests by depositors to withdrawal large amounts of deposits.C.A decrease in the bank's stock price caused by market factors.D.An increase in requests to fund large amounts of loan commitments.E.A decrease in asset prices of securities held in the investment portfolio.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.