The classification of banking risks

Banking is a form of entrepreneurship. Doing business is always in risky conditions. The aim of any bank is money, and that means a high probability of them both earn and lose. Bank risk is the potential likelihood of a credit institution to bear their own losses as a result of internal and external factors. There is a different classification of banking risks. However, often, they are divided into five groups: credit, market, portfolio concentration, liquidity, business and operations. The main types of risks are: credit risk. Arises from the bank in consequence of insolvency of customers who can not in time to return the borrowed money. Market risk. Threatens the loss in market value of securities, currencies and precious metals. Equity risk. Affect the market value of assets that have a significant impact on the performance of banking activities. Currency risk. May be caused by sharp fluctuations in currency values. If the value of money falls sharply, the bank and customers are suffering losses. Interest rate risk. Leads to losses due to changes in interest rates of financial instruments of a credit institution. Legal risk. The likelihood that a State may modify rules for banks to more negative and therefore they will suffer financial losses. Reputational risk. Is that because of the mistakes employees within the agency clients may lose confidence in the bank - and this will reduce profits or bankruptcy. Strategic risk. Based on a short-sighted policy of the bank or illiterate, who took a wrong decision. Systemic risk. The probability of losing money due to an error in the computational process, due to viruses or mechanical failures. This classification of banking risks are not of course - with the development of technologies of their number is increasing. Whatever the risks, there are many ways to avoid unnecessary losses. One is insurance against financial risks. This tool allows you to minimize the damage from the material losses of banks and their customers.