One of the main functions of a bank is lending, but every time a bank advances money to a customer, be it an individual or an organisation, it creates credit risk. However, credit risk is only one of the many forms of risk a bank faces in its daily operations. Until recently, it could be asserted that, banking regulation was focused only on credit risk with limited emphasis on other forms of risk.
Requirement:
Critically evaluate the various forms of risk that banks face and outline how these risks can be managed. In addition, consider and critically evaluate the view that regulators have focused only on credit risk. Draw conclusions as to how regulators might expand the regulations to take account of other forms of risk.
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