FIN80018 Financial Risk Management Assignment

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Financial Risk Management (FIN80018)

Added on 2020-06-06

FIN80018 Financial Risk Management Assignment

Financial Risk Management (FIN80018)

Added on 2020-06-06

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FINANCIAL RISKMANAGEMENT

Table of ContentsLITERATURE REVIEW................................................................................................................12.1 Overview of credit risk..........................................................................................................12.2 Concept of credit risk management and consequences of inadequate credit risk management.................................................................................................................................32.3 Relevant regulations: Basel Accords.....................................................................................42.3.1 Basel I: Basel Capital Accord.........................................................................................42.3.2 Basel II: New Capital Accord.........................................................................................42.3.3 Basel III...........................................................................................................................72.4 Measurement of Credit risk management and its suitability..................................................72.5 Measurement of bank’s profitability and key determinants...................................................92.6 Review of empirical literature/previous studies...................................................................13REFERENCES..............................................................................................................................14Index of Figure

FIN80018 Financial Risk Management Assignment_2

Figure 1 Three key Pillar Approach of Base II................................................................................5Figure 2 Calculation of Capital ratio under Basel II........................................................................5Figure 3 Dupont Model for Bank’s profitability measurement.....................................................10

FIN80018 Financial Risk Management Assignment_3

Title: “To investigate the impact of credit risk management on the profitability and financialperformance; A case study of Bank of Cyprus”LITERATURE REVIEWLiterature review is a process wherein scholar critically evaluates the existing knowledge,methodological and theoretical contribution & substantive findings regarding the research topic.In this regards, researchers uses only the secondary material sources without conducting anyoriginal investigation or experimental work in the chosen field. Literature review is a processwherein scholar critically evaluates the existing knowledge, methodological and theoreticalcontribution & substantive findings regarding the research topic. In this regards, researchers usesonly the secondary material sources without conducting any original investigation orexperimental work in the chosen field. It is important for the investigator to select the bestarticles that was published in the past period on a similar topic so as to critically evaluate &compare all the information to develop own idea or concept towards the subject. It will helps toidentify loopholes and gaps in the previous studies so as to make it sure that the current studywill not replicate the historical researches and conduct the study in new area by mitigate theearlier gaps. With the help of this, scholar will be able to examine the concept of credit risk, itsconsequences and its management process used by Bank of Cyprus in a thoroughly,comprehensive & informative manner. In this, scholar will pay special attention to collectinformation from the realistic and valid secondary sources by gathering sufficient quantum ofdata from the recent published articles and also the proper references will be made to provideadequate evidences. Moreover, various key legislations and policies applicable on the bank willbe examined and key determinates which influence Bank’s financial status and profitabilityperformance will be examined analytically.2.1 Overview of credit riskCredit is the key source of revenue for the banks all over the world, however, in thecurrent time; probability of borrower’s default in loan payments becomes an increasing area ofconcern for the commercial banks, more importantly, for the unsecured loans, and such risk ofpayment default is termed as credit risk. It has a significant effect not only on the bank’sperformance but also to the entire economy. It is because; banking sector plays a vital role in the1

FIN80018 Financial Risk Management Assignment_4

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FIN80018 Financial Risk Management Assignment