Risk Assessment Report of Royal Bank of Scotland

Running head: FINANCIAL MARKET AND INSTITUTES
Financial Market and Institutes
Name of the Student:
Name of the University:
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FINANCIAL MARKET AND INSTITUTES
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Executive summary:
Royal Bank of Scotland is one of the subsidiaries of Royal Bank of Scotland Plc. with
more than 700 branches in all across Scotland and England. Also known as RBS, it mainly
operates in Scotland, England and Wales with most of its branches situated in the Scotland. Over
the years the performance of RBS have taken sharp nose dive as far as the amount of revenue
and profit are concerned. A brief look at the financial reports of the bank will be enough to
understand the steady and significant decline in the amount of gross interest revenue and profits
over the last 10 years. However, the topic of discussion of this document is not about the
financial performance of the bank but to assess risk associated with the operations of the bank. A
risk assessment report of the bank is produced below to help the readers to understand the risk
portfolio of the bank. The report below covers strategic risk, interest rate risk, market risk,
liquidity risk,, credit risk and risk associated with foreign exchange of the bank.

FINANCIAL MARKET AND INSTITUTES
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Contents
Executive summary:........................................................................................................................1
Introduction:....................................................................................................................................3
Comprehensive risk assessment report:...........................................................................................3
Interest rate risk:........................................................................................................................11
Liquidity risk:............................................................................................................................16
Market risk:................................................................................................................................16
Credit and credit portfolio risk:.................................................................................................17
Foreign exchange risk:...............................................................................................................17
Conclusion and recommendations:................................................................................................18
References:....................................................................................................................................19

FINANCIAL MARKET AND INSTITUTES
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Introduction:
RBS and its parent Royal Bank of Scotland Plc. are completely separate entity when it comes to
banking operations. Established in 1724 in the Scotland, RBS has grown into one of the largest
banks in the world by the time 21st Century ushered in. However, the performance of the bank
has deteriorated significantly in recent years with ever decreasing gross interest income and net
income from interest in last 10 years. The risk associated with the banking operations is often a
key element in the overall performance of an organization. Especially in case of banks the
importance of risk assessment is crucial to the performance of the banks. A comprehensive risk
assessment report of RBS is provided below along with necessary analysis to assess the state of
risk associated with the banking operations.
Comprehensive risk assessment report:
A comprehensive risk assessment report of an organization is a report prepared to outline each
and every single risk associated with the operations of the organization. Along with identification
of the risks associated with the operations the report also contains appropriate recommendations
to deal with stated risks effectively. In this case the comprehensive risk assessment report of
RBS shall contain different types of risks affecting the performance of the bank (Delis, Hasan &
Tsionas, 2015).
Strategic risk:
As can be seen from the financial reports of the RBS for the last 10 years and above the gross
revenue of the bank, especially total income from interests and net interest income have both
declined significantly. Strategic risk can be defined as the risk of suffering decline in operating
income due under-performance of an organization which is not compensated by the reduction in