What are the major financial risks

The major risks faced by financial institutions are:

1. Market Risk

Market risk refers to the risk that investors will not be able to obtain the expected returns due to market fluctuations, including unfavorable fluctuations in prices or interest rates and exchange rates due to economic reasons. In addition to the unfavorable impact of fluctuations in stock, interest rate, exchange rate and commodity prices, market risk also includes the cost of financing risk, dividend risk and correlation risk.

2. Credit Risk

Credit risk refers to the possibility of non-performance of obligations by one party to a contract, including loans, swaps, options, and the risk of loss due to default of the counterparty in the settlement process. Financial institutions are exposed to credit risk when they enter into loan agreements, over-the-counter (OTC) contracts and grants of credit. Credit risk can be minimized through risk management controls and procedures such as requiring counterparties to maintain adequate collateral, pay margins, and provide netting provisions in contracts.

3. Operational Risk

Operational risk is the risk of loss due to improper operation of the trading or management system, including the risk arising from internal control of the company. The internal control of the company's performance includes, exceeding the risk limit without detection, overstepping the authority of the transaction, transaction or back-office department fraud (including books and transaction records are incomplete, the lack of basic internal accounting controls), the staff's unskilled and unstable and easy to access the computer system, etc..

Warm note: The above explanation is for reference only.

Response time: 2021-12-02, the latest business changes, please refer to the official website of Ping An Bank announced.