Credit Risk: Identification

Credit Risk: Identification

Intuition Publishing Pty Ltd
Updated Aug 26, 2020

Credit risk, the risk of loss due to another party failing to meet its contractual obligations, is present in a bank's trading book as well as its banking book. Banks must also take into account future credit exposures and the dependency of defaults when considering credit risk. Here we look at how credit risk arises in both the banking and trading book and factors which banks must consider to obtain a true picture of the overall level of credit risk.