Report On Risk Related To Monetary Services & Aspects

Added on -2020-02-05

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Banking Regulation
ContentsINTRODUCTION...........................................................................................................................31. Describing the key risks that are associated with financial services along with preventionmeasures......................................................................................................................................32. Stating the manner in which bank’s return in equity can be improved through leverage.......73. Explaining the process of securitization and presenting its usefulness...................................84. Defining the key features of Base II including three pillars framework...............................11CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTION Banking regulations implies for Act which in turn presents new laws for licensing andregulation of institutions. With the motive to ensure smooth functioning of business operationsand functions of financial institution government authority frames some rules. Thus, monetaryinstitutions are required to follow rules and regulations pertaining to merchant banking, discounthouse as well as money broking business. In addition to this, to avoid undesirable situationsgovernment authority has framed some rules pertaining to financial matters or aspects. Hence,banking rules and regulations are highly significant that provides high level of assistance in carryout activities more effectively and efficiently. In this, the present report will describe the risk thatis related to monetary services and aspects. Besides this, it will also shed light on the processneeds to be followed at the time of scrutinizing. It will also provide deeper insight about the keyaspects related to base II which in turn helps in assessing regulatory, market and operational riskmore effectually. 1. Describing the key risks that are associated with financial services along with preventionmeasures In the strategic business arena, for attaining success and maximizing productivity it ishighly required for banking institutions to undertake suitable measures for preventing risk. Thereare several types of risk such as financial, operational, legal etc. that have greater impact on theperformance aspect of firm. Thus, to carry out activities in the best possible manner it is highlyrequired for financial institution to assess the type of risk that closely influences their successand growth level. By doing this, firm would become able to take suitable prevention measurewhich in turn helps in getting the desired level of outcome or success. From assessment it hasbeen identified that banking institutions are majorly facing operational risks that directly impactsthe aspect of financial services. Operational risk implies for the loss that occurred due to havinginadequate system, procedures and policies. In the context of banking institution, operationalrisks that are associated with financial services are enumerated below:Conduct risk: It implies for risk that arises according to the manner in which businessand its employees perform in relation to their clients and competitors. Hence, poorconduct is one of the main issues that have direct impact on sales and profit aspect. Thus,
for the attainment of success in the competitive business arena it is needed for bankinginstitutions to undertake effectual measure for the purpose of improvement. Regulation: In the past years, due to the aspect of mis-selling related to subprimemortgage and manipulation of global foreign exchange market aspect in relation regulatorfine imposes high risk (Lujja and et.al., 2016). Hence, after the period of 2008 regulatorsfine become a major issue for institutions operating in banking sector. Organizational change: By doing assessment, it has been found that in the case offinancial services change is constant to a great extent. During the period of 2008, whenmonetary crisis occurs, there were several firms which undergoes from the process ofmerger and restructuring. Besides this, at the time of 2008, many banking institutionswere compelled to close down their institutions. IT failure: In the business unit, IT failure and breakdown closely affects the performanceaspect of operational level employees. Moreover, in the recent times, all the activities andfunctions of banking institutions are highly based on IT aspects. Thus, in the absence ofhaving sound IT mechanism it is not possible for the personnel of banking institutions tointeract with customers (PY Lai and Samers, 2017). For instance: Many trading firms arehighly relying on electronic trading platform which in turn facilitates transactions in afraction of seconds. In this, any breakdown which takes place in IT aspect closelyinfluences customer satisfaction and productivity as well as profitability. Data protection risk: In the present era, undesirable or illegal practices such as hackingincreased more frequently. Now, hackers steal account details of individual from both bankinginstitution and concerned customer. Hence, sound data protection policy needs to be framedwhich for reducing the level of risk. Regulatory fatigue: Growth and performance aspect of company is going to be affecteddue to the failure of government in making structural changes. Besides this, governmentauthority also fails to assess and develop additional rules for ensuring systematic financialservices. Further, it has been found that there are several firms whose IT change capacity is beingused to a great extent in line with the changing regulatory requirement. On the other side, therewere some firms who left with limited capacity or aspects (Abdul Wahab and et.al., 2017). Thisin turn places direct impact on the strategic and performance aspects of concerned institute or

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