The concept of banking risks and their causes

At the second stage, based on a common set of risk factors developed algorithms for the evaluation of indicators of market risk:

• earnings and losses;

• Value-at-Risk (VaR);

• scenario analysis;

• sensitivity analysis.     

In the third phase for the development of a complete system of market risk management is necessary to make a test of the model, and develop reporting procedures for managing market risk.     

The use of modern technologies in the management of market risk not only increase the reliability of the bank, but will improve strategic and operational decision-making on the management of the bank, as well as to improve the image of the bank.     

However, the specifics of the Russian market requires building your own set of risk factors that hampers the use of ready-made Western-making for risk assessment.     

In all cases, the risk to be determined and measured. Risk analysis and assessment is largely based on a systematic statistical method of determining the likelihood that an event will occur in the future. Generally, this probability expressed as a percentage. Relevant work can be carried out, if developed risk criteria for ranking alternative events, depending on the degree of risk. However, the starting point of the work is preliminary statistical analysis of the concrete situation.      

The basic tools of statistical analysis are - variance, standard deviation, coefficient of variation. The essence of this approach is to analyze the statistical data for the greatest possible period of time, which allows you to compare the incidence of bank losses with a probability of their occurrence. This method can be applied to the evaluation of different types of risks the bank, both external and internal. In this case, the frequency of occurrence of an acceptable level of loss to the bank depends on the number of cases, the onset of a specific level of losses and the total number of cases in the statistical sample.      

Quantify the amount of risk can be expressed in absolute and relative terms. In absolute terms, the risk is the amount of possible losses in carrying out certain operations. However, to estimate these losses with sufficient accuracy is not always possible. If the size of potential losses attributed to any indicator that characterizes banking, for example, to the size of credit resources, the size of the bank's income or expenses in connection with the implementation of a specific operation, you get the amount of risk in relative terms.     

In the banks are mainly used, the following methods: scoring methods, cluster analysis, discriminant analysis, classification trees, neural networks, technologies of Data mining; probabilistic linear regression model; Logit-analysis, etc.     

Lending to businesses and individuals is one of the main activities of commercial and government of large, medium and small banks. Therefore it is important to ensure the sustainability of the bank are the methods for quantitative measurement of credit risk. Price risk should be possible to accurately account for the magnitude of the risk of each loan. In addition to the average amount of risk as determined by statistics of previous activities, the bank should know and quantify the components of the risk of each loan.     

Each bank develops its risk model for quantifying and analyzing credit risk in view of the general recommendations of the Basel Committee on Banking Supervision. The higher the accuracy of risk assessment loans, the less the loss of the bank, less than the percentage for the credit and higher competitiveness of the bank. From improved accuracy and transparency of methods all of society benefits as a whole. Creating an efficient and optimal risk models, credit risk management is possible only on the basis of continuous quantitative analysis of statistical information about the success of credit.     

There are different approaches to determining the credit risk of the private borrower from subjective assessments of skilled and professional finishing with automated systems of risk assessment. World experience shows that based on mathematical models of systems are more efficient and reliable. In order to build a credit risk model is sampled first customers of the credit institution, which is already known to be good borrowers they proved themselves or not. This selection can range from a few thousand to hundreds of thousands, that is not a problem in the West, where the company's loan portfolio may consist of tens of millions of customers. The sample contains information on two groups of loans that took place in the bank's "good" and "bad" (problematic or unreturned.)     

By the methods for quantifying credit risks impose specific requirements on transparency, including quantitative estimates of accuracy and robustness.     

Transparency techniques of credit risk - this is an opportunity not only to see the phenomenon as a whole, but its details. Transparency has become the most important characteristic of methods for credit risk assessment because of the need to identify both the most complete credit risk and the credit risk of the model itself. Under the transparency of procedures we understand the severity of the mathematical methods, smoothing the subjectivity of expert evaluation, presentation of results and risk analysis, a complete understanding of them by the employees of banks, the openness of techniques for controlling bodies and borrowers. The transparency of the methodology and the results achieved by calculating the contribution of initiating events (criteria) in credit risk.     

For the analysis, prediction and management of credit risk to each bank must be able to quantify these characteristics, to analyze risk and to continuously monitor the credit risk component characteristics.      

Of recognition accuracy depends on the decision to grant or deny a loan, the price (interest rate) risk and the level of redundancy in the event of default of the loan. The accuracy of estimated relative errors in the recognition of "bad" and "good" loans (clients) and their average amount. Usually stipulate that the "bad" loans be recognized better. The ratio of incorrectly recognized "good" and "bad" loans purchased from 2 to 10. Similarly, the problem is stated precisely, if the loans are not classified into two, and a few classes. Comparison of different methods on the same data showed that different risk assessment methodologies are different in almost exactly twice.     

Robustness characterizes the stability of the credit risk assessment methodologies. Different methods of risk or another technique for different learning algorithms for statistical data unequally classify loans into "good" and "bad." The same loan at one technique may be considered "bad", but by a different method "good." Such instability in the classification reaches 20% of total loans. Comparison of different methods on the same data showed that different methods of risk may vary on the robustness of seven.     

Thus, the risk is a probability category, which may be a sufficient degree of accuracy using the estimated loss analysis. Depending on the risk of loss isolated zone:

1. zone of acceptable risk - this is where the loss of some activities are possible, but they are less than the expected profit.

2. critical area of ​​risk - characterized by the danger of losses which obviously outweigh the potential profits and the maximum result in the loss of funds invested in the operation.

3. catastrophic risk area - this is when the loss exceeds a critical level and apply to the property of the bank.     

The zones are established using risk ratios. Risk ratio is defined as the deviation of the maximum possible value loss to equity. If the hazard ratio is less than 0.3 - a zone of acceptable risk, from 0.3 to 0.7 - a critical area of ​​risk, 0.7 and more - Zone catastrophic risk.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Management of banking risks

 

3.1. The essence of risk management

 

 

     During the financial crisis looks very urgent problem of efficient, professional banking risk management, operational risk management.     

The problem of risk management in each bank is one of the main places, because the wrong approach in this matter can not simply lead to large losses, but also to the closure of the credit institution.      

At present, many Russian banks is the allocation of specific employees and departments whose function is to organize the management of banking risks or risk management.     

The main objective of risk management is to maintain appropriate relations with the safety record of profitability and liquidity in asset and liability management, that is, to minimize bank losses.      

All of this involves the development of each bank's own risk management strategy, that is, the policy framework of decision-making so that timely and consistent use all the features of the bank and at the same time keep the risks to an acceptable and manageable level.     

The basis of the bank risk management should be guided by the following principles:

• prediction of the possible sources of losses or situations that could cause damage to their quantitative measurement;

• financing risks, economic incentives to reduce them;

• the responsibility and duty of managers and employees, the clarity of policy and risk management mechanisms;

• Coordinated control of risks across all departments and services of the bank, monitoring the effectiveness of risk management procedures.     

The level of risk associated with a particular event, are constantly changing due to the dynamic nature of the external environment of banks. This makes the bank regularly refine their place in the market, to assess the risk of certain events, review the relationship with clients and assess the quality of their own assets and liabilities, therefore, to adjust their policies in the field of risk management.     

Such work can not wear sketchy and delivers results when developed and implemented certain risk strategy:

• identify factors that increase and decrease the risk of a particular type in the implementation of certain banking operations;

• Analysis of the factors identified in terms of the magnitude of the effect on risk;

• assessment of a particular type of risk;

• setting the optimal level of risk;

• analysis of individual transactions for compliance with the acceptable level of risk.

• development of measures to reduce risk.     

Risk management tools portfolio:

• Regulatory and legal support;

• The methodological and information support;

• Banks and databases;

• Automated control systems (ACS).     

The main methods of risk management: a statistical method, the analytical method, the hedge.     

The statistical method is to study the statistics of the losses and gains that occurred when making similar measurements, establish the magnitude and frequency of getting some economic return, and then conduct a probability analysis and predict the future behavior of the market.     

Analytical methods are used as a risk management tool to proactively manage risk and allow the development of forecasts and risk management strategies prior to implementation of the project. The main task of analytical methods of risk management is to identify risk situations and the development of measures aimed at reducing the negative consequences of their occurrence. The objectives of analytical methods for risk management include the prevention of risk situations.      

Management practices designed to reduce the risk of a negative result occurred during the implementation of risk situations. Typically, they are based on the analytical methods of risk management. At the same time, practical risk management techniques are the basis for the creation of an information base for risk management and the subsequent development of analytical methods.      

There are two approaches analytical analysis of the financial market:     

- Fundamental (based on the view that the movement rate financial instruments reflects the state of the economy as a whole)      

- Technical (largely based on the use of psychological indicators (sentiment indicators) and cash flow analysis (flow of funds analysis)).     

Hedging - a method based on the insurance price effects in the physical market in relation to the futures or options markets. As for the physical market stock options can be a real market (currency, stock) and futures.     

An integrated approach to risk management allows for more efficient use of resources, share responsibility, to improve performance.     

The Bank needs to pick up its portfolio of clients in such a way as to have the most optimal ratio between active and passive operations to maintain its level of liquidity and profitability necessary for the smooth operation level. For this purpose it is necessary to conduct regular analysis of the level of all kinds of risks, determine their optimal value for each moment and use the full range of ways to manage them.     

The final, most important step in the process of risk management - prevention (warning) of risks or minimize them.

 

 

3.2. Methods to reduce the risk

 

 

     There are the following methods of risk management:     

a) avoid (avoidance) of risk;     

b) limiting the risk;     

c) reduction of risk;     

d) transfer (transfer) of risk, including insurance;      

e) the assumption of risk.     

Through these methods are different strategic decisions aimed at minimizing the negative consequences of decisions:     

1.Use principle of weighing the risks, ie combine high-risk operations with risk-free.     

2. Systematic analysis of the financial condition of the customer.     

3. The policy of diversification, ie reduce the risks due to the possibility of compensation of losses in one area of ​​the bank profits in the other (or so it is better to give a lot of small loans than a single large). Diversification is widely used in the financial markets and is the foundation for portfolio management     

4. Large loans provided to a syndicated basis, ie Several banks give out one big loan to the client.     

5. The introduction of certificates of deposit.     

6. Limitation, ie limit values ​​for the parameters in making tactical decisions. rNaibolee convenient and applied method of limiting risk - limits on the financial results. The use of such widespread international practice limits as stop-loss, stop-out, take profit and take out, can effectively control blood loss.     

7. Compliance with prudential regulations. In contrast to the concept of risk and the value they characterize the state of the liabilities. Analysis of the state regulations are subject to risks allows for more realistic represent the actual financial position bankov.4      

7. The use of variable interest rates.     

8. The introduction of the lien.     

9. The use of hedging system to enter into derivative contracts, taking into account future changes in exchange rates.     

10.Formirovanie bank currency baskets, ie of currencies in certain proportions so that the courses were swimming in opposite directions, making the basket stable.     

11.Strahovanie. The most common insurance of bank credit risk. Objects of insurance credit riskovyavlyayutsya bank loans, commitments and guarantees, investment credits. When non-repayment loan lender poluchaetstrahovoe compensation, partially or completely offsetting the loan amount.      

12.Sostrahovanie - insurance of the same object of insurance by several insurers under one contract of insurance. When co-insurance may be issued to a joint or separate insurance policy based on the amount of risk taken by each co-insurers and recorded in the insurance amount.     

13.Dvoynoe insurance - insurance by several insurers of the same type of risk.     

14.Perestrahovanie - the protection of one insurer (the reinsurer) property interests of another insurer (the reinsurer).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conclusion

 

 

     Consideration of the most well-known types of banking risks showed their diversity and complex nested structure, that is one kind of risk is determined by a set of others. This list is not exhaustive. Its diversity to a large extent determined by the ever-increasing range of banking services. A variety of banking operations complemented by a variety of clients and changing market conditions.     

It is important that the organization has developed and implemented procedures for risk management, as well as the measurement model - this is the main task of the functions of risk management. The objectives also include the approval of methods of quantitative risk assessments, monitoring limits and risks, develop appropriate reporting forms, the creation of a plan of work in substandard conditions.     

Statistical models for the prediction of risks and biased give conflicting predictions, underestimating the risk of co-incidence of the various assets. Chosen is not the best measure of risk, while the best risk models exist. Need to develop more advanced models and corresponding software tools for credit risk assessment of natural and legal persons who possess significant advantages in accuracy, robustness, transparency and automation of analysis, risk assessment and management      

Now the financial crisis has led to the growth of banking risks, the emergence of significant losses that threaten the financial stability of credit institutions and the Russian banking system as a whole.     

Summing up the work, I would say the following. Modern bank is not afraid of risk, he sees it as one of the elements of its activities with which to work methodically and you can and should be managed.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

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