APPETITE FOR RISK OF THE BANK (II)

Gheorghe Manolescu
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Gheorghe Manolescu: Centre for Financial and Monetary Research “Victor Slăvescu”, Romanian Academy

Studii Financiare (Financial Studies), 2011, vol. 15, issue 3, 140-155

Abstract: Representing the "amount" of risk that a bank is able and willing to accept in pursuit of its objectives, so as to balance the needs of all interested parties the risk appetite (propensity) is expressed in terms of both quantitative and qualitative, and covers all risks and not just financial risk, as understood in recent years. Risk appetite problems include issues such as the context and relationship of the risk appetite to the appetite risk aversion, fair and transparent declaration and communication of its risk appetite of the bank, applying risk appetite, determining, assessing and measuring risk appetite bank. Understanding the risk appetite will be possible only when the risk to the bank will be seen in the context of potential profit and capital requirements and business prospects of the bank will be aggregated into a picture (portfolio) of the bank's strategy, a consistent approach to appetite risk equivalent to a bank's approach to strategy, requiring that the entire top leadership of the bank to get involved Appetite for risk is an evolving concept that requires a continuous effort of research and although the concept is still unclear, the appetite for risk is a useful tool for risk management within the bank as a whole.

Keywords: appetite for risk; capacity for risk; bank risk management; risk profile; measuring appetite; economic capital; guiding value; discount factor. (search for similar items in EconPapers)
JEL-codes: E10 G11 G32 (search for similar items in EconPapers)
Date: 2011
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