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Bank and Credit Risk - Coggle Diagram
Bank and Credit Risk
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Risk-Adjusted
Loan Pricing RAROC (Risk-adjusted return on capital) is the profitability of capital after considering all costs
measure expresses expected profit (net of all costs including expected losses) as a percentage of economic capital, or worse case loss.
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Collateral Management
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The liquidation of collateral can involve legal, market, and reputational risk, as well as time and resources
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Modelling Credit Risk
The credit risks to each obligor across the portfolio are restated on an equivalent basis and aggregated in order to be treated consistently, regardless of the underlying asset class
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Limits and Risk Appetite
set the quantity and type of risk the bank will tolerate within its total capacity to pursue its business objectives
Loan Balances
The bank needs to believe the merger will be cash generative to reduce leverage in a reasonable time frame
Workout Process
Corporate Debt Restructuring - Banks attempt first to refinance debt, which involves extending the maturity and thus reducing and rescheduling payments.
Recovery Value
virtually all defaulted assets return an element of recovery value, although the time taken to realize this value can be very long indeed
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Time horizon
The choice of time horizon will not be shorter than the time frame over which risk-mitigating actions can be taken