MMPB 004 Solved Assignment 2023-24
Risk Management in Banks
MMPB 004 Solved
Assignment 2023-24 : All assignments are in PDF format which would be send
on email/WhatsApp (9958676204) just after payment.
Assignment Code: ASST/ MMPB 004/2023-24
Marks: 100
Attempt all the questions.
Q1. Why do risks in
banks need to be regulated? Discuss the Basel III Accord and the building
blocks of this Accord.
The regulation
of risks in banks is crucial for maintaining financial stability and protecting
the interests of depositors, investors, and the broader economy. Unregulated or
inadequately managed risks in the banking sector can lead to financial crises,
bank failures, and significant economic downturns. To address these concerns,
international regulatory frameworks, such as the Basel III Accord, have been
developed to establish standards and guidelines for banks to follow in managing
their risks.
The Basel III
Accord, introduced by the Basel Committee on Banking Supervision (BCBS), is a
set of international banking regulations that aims to strengthen the
regulation, supervision, and risk management within the banking sector. It
builds upon the earlier Basel I and Basel II accords, incorporating lessons
learned from the global financial crisis of 2007-2008.
The key
building blocks of the Basel III Accord include:
Minimum Capital
Requirements: Basel III introduces more stringent capital requirements compared
to its predecessors. Banks are required to maintain a minimum level of common
equity Tier 1 (CET1) capital as a percentage of their risk-weighted assets.
This capital acts as a buffer to absorb losses during periods of financial
stress.
Capital
Buffers: Basel III introduces additional capital buffers to enhance the
resilience of banks. These include the Capital Conservation Buffer, the
Countercyclical Capital Buffer, and the Systemic Risk Buffer. These buffers
provide an extra layer of protection during economic downturns and periods of
increased systemic risk.
Leverage Ratio:
To prevent excessive leverage, Basel III introduces a leverage ratio that
measures a bank's capital against its total exposure. This serves as a backstop
to the risk-based capital requirements, ensuring that banks have a minimum
level of capital to cover their total assets.
Liquidity
Requirements: Basel III introduces two liquidity standards – the Liquidity
Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). The LCR ensures that
banks have sufficient high-quality liquid assets to cover their short-term
liquidity needs, while the NSFR addresses the stability of a bank's funding
profile over a longer time horizon.
Counterparty
Credit Risk: Basel III enhances the regulatory framework for managing
counterparty credit risk in derivatives and other financial transactions. It
introduces the standardized approach for measuring counterparty credit risk
(SA-CCR) and the credit valuation adjustment (CVA) risk framework.
Risk Management
and Governance: The accord emphasizes the importance of effective risk
management and governance practices within banks. It encourages banks to have
robust risk management frameworks, including risk identification, assessment,
and mitigation strategies. Strong governance ensures that decision-making
processes are transparent and accountable.
Enhanced
Disclosure Requirements: Basel III introduces enhanced disclosure requirements
to improve the transparency of banks' risk profiles and capital adequacy. This
helps market participants, regulators, and the public to assess a bank's
financial health and risk exposure.
By implementing
these building blocks, the Basel III Accord aims to create a more resilient and
stable banking system, better equipped to withstand economic shocks and protect
the broader financial system. Regulatory oversight helps ensure that banks
operate in a prudent manner, reducing the likelihood of systemic failures that
can have severe consequences for the global economy.
Q2. Explain the Risk
Management function in a Bank and discuss the role of the functionaries who are
involved in it.
Q3. What is the use of
Credit Derivatives? What are the benefits and risks of using these Derivatives?
Q4. Meet the Manager
of the Bank of your choice and discuss the need for Asset-Liabilities Committee
in a bank. Also discuss the role played by the sub –committees in the areas of credit,
investment, and liabilities of a Bank.
Q5. What is the need
for reporting risk of a Bank? Discuss the principles for effective risk data
aggregation and risk reporting.
MMPB 004 Solved
Assignment 2023-24 : All assignments are in PDF format which would be send
on email/WhatsApp (9958676204) just after payment.
MMPB 004 Solved
Assignment 2023-24, MMPB 004 Solved Assignment 2023-24, MMPB 004 Solved Assignment
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