Banking Risk and Regulations - Bank Management - Lecture Slides, Slides of Banking and Finance

Download Banking Risk and Regulations - Bank Management - Lecture Slides and more Slides Banking and Finance in PDF only on Docsity! Banking Risks and Regulation Docsity.com Changes in Indian Banking Docsity.com Possibilities of Coping with Challenges S ae “% g % Innovative Reliable Technology Service Products Support Changed Management Cost Strategies Outlook Control Flexible Consolidation Trained < Systems of Activities Personnel SS A MD, S “es, oo® Docsity.com Bank Nationalization • After the independence the major historical event in banking sector was the nationalization of 14 major banks on 19th July 1969. • The nationalization was deemed as a major step in achieving the socialistic pattern of society. • In 1980 six more banks were nationalized taking the total nationalized banks to twenty. Docsity.com Products and Services of Banks • Value added services to customers • Emergence of strong investment and merchant banking entities • Product innovation and creating brand equity for specialized products • New products on the liabilities side such as – Foreign exchange linked deposits – Investment linked deposits Docsity.com New Banking Products • Offer of hedge products to the corporate sector and other investors – Commodity derivatives • Sophistication in trading and specialized exchanges for commodities • Financial support to exchanges • Better settlement systems • Wider participation Docsity.com Bancassurance • Entry of banks / financial institutions in insurance business. • Offer of insurance products through network of bank branches. • Expansion of business through self-designed insurance products after necessary legislative changes. • Increased fee-based income of the banks. Docsity.com Banking Risk • Rising global competition • Increasing deregulation • Introduction of innovative products • Changing delivery channels of banks • Perfect market economy introduces market related risks – Exchange risks – Interest rate risks – Operational risks Docsity.com Managing Banking Risk • Combined assessment of credit, market and operations • Reporting and managing on risks on an integrated basis • Risk Adjusted Returns on Capital (RAROC) based performance measures • RAROC will be used to drive pricing, performance measurement, portfolio management and capital management Docsity.com Managing Banking Risk • Corporate office to branches or operating units • Audit and supervision shifts to a risk based approach rather than transaction orientation • Increased risk awareness levels of line functionaries • Technology related risks focusing more on vigilance of operating staff Docsity.com Managing Banking Risk • Reputation risk – Maintain a high degree of public confidence for raising capital and other resources • Risks to reputation could arise on account of – Operational lapses – Opaqueness in operations – Shortcomings in services • Management of reputation risk – Systems – Internal controls Docsity.com Role of Regulator • Ensuring soundness of the system by fixing benchmark standards for capital adequacy and prudential norms for key performance parameters. • Adoption of best practices especially in areas like risk management, provisioning, disclosures, credit delivery, etc. • Adoption of good corporate governance practices. • Creation of an institutional framework to protect the interest of depositors. • Regulating the entry and exit of banks including cross-border institutions. Docsity.com Role of Indian Banks’ Association • Self regulatory body • Development of benchmarks on – Risk management – Corporate governance – Disclosures – Accounting practices – Valuation of assets – Customer contract – Lenders’ liability Docsity.com Role of Indian Banks’ Association • Role of the Indian Bankers’ Association – Lobbyist for getting necessary legislative enactments – Changes in regulatory guidelines Docsity.com