Overview of Risks

Risk type
Definition / Main characteristic
credit risk
the risk that a borrower will fail to meet its obligations in accordance with agreed terms
operational risk
the risk of loss resulting from inadaquate or failed internal processes, people and systems or from other external events
market risk
the risk that the value of an investment will decrease due to changes on the financial market / in market factors
liquidity risk
the risk that over a specific horizon the bank will be unable to settle obligations when due
systemic risk
the risk that an event will trigger a loss of economic value or confidence in a substantial portion of the financial system
Interest rate risk or interest risk is defined as a negative effect on the cash flow of the bank from changing interest rates. Interest rate risk derives from the case, that the interest rate sensitivity of the bank’s assets and liabilities are different. An asset (e.g.: loan) or a liability (e.g.: term deposit) is interest rate sensitive, if the pricing can change during a specified period. At the expiration of a specific asset or liability the environment might change and consequently the conditions of the new assets or liabilities also change.