Bank Risks, Regulatory Interventions and Deconstructing the Focus on Credit Risk

Abstract

The risks that banks face have been exacerbated by the globalization and liberalization of the financial markets. The liberalization of the financial markets has exposed banks to a plethora of risks such as credit risk, liquidity risk, operational risk, counterparty risk, regulatory risk, systematic and reputational risks. A recurring discourse in the risk management literature is the perceived concentration of regulatory authorities on credit risk. This topic is reconsidered in this paper to critically evaluate the different risk types and to interrogate the assertion that regulatory authorities have focused more on credit risks of banks while shying away from other possible risks that banks face.  Reviewing contemporary literature and regulatory interventions, we conclude that contrary to the claims that regulatory interventions have focused on credit risk of banks, attempts have been made to address in broad terms the gamut of risks that banks face.

Keywords: Bank risks, Regulatory interventions, Credit risk

DOI: 10.7176/RJFA/10-8-09

Publication date: April 30^th 2019