EBI Publications

- Market Risk is the possibility of loss over a given period related to uncertain movements in market factors, such as interest rates, currencies, equities, and commodities. - Operational Risk refers to the possibility of loss resulting from inadequate failed internal processes, people and systems or external events. - Legal Risk is the risk that unenforceable contracts, lawsuits or adverse judgments could negatively affect the operations, profitability, condition, or solvency of the bank. - Reputational Risk is the risk that negative publicity, either true or untrue, adversely affects a bank’s customer base or brings forth costly litigation, hence negatively affects profitability. - Country Risk is the risk of negative effects on the financial result and capital of the bank due to bank’s inability to collect claims from such entity for reasons arising from political, economic or financial conditions in such entity’s country of domicile. - Strategic Risk is the risk of loss caused by a lack of a long-term development component in the bank’s managing team. Types of Risks: There are various types of risk, and the risk management deals with their timely identification, assessment and proper handling. The risks to which a bank is particularly exposed are: liquidity risk, credit risk, market risk, operational risk, legal risk, reputational risk, country risk and strategic risk. The definitions of these risks can be summarized as follows; - Liquidity Risk is the risk originated from the bank’s inability to meet all its liquid liabilities, because of unexpected deposits withdrawals. In this sense, an unexpected liquidity shortage’s meaning expands beyond the inability of the bank to meet its liability obligations to include its inability to fund its illiquid assets. - Credit Risk is the risk that an asset or a loan becomes irrecoverable because of default, or the risk of delay in servicing of the loan. An example of this is the case of a customer defaulting on the maturity of either the loan principal or its interest, or any other type of financial contract.