Types of Credit Risk
Credit risk can be classified in the following way:
- Credit default risk - The risk of loss arising from a debtor being unlikely to pay its loan obligations in full or the debtor is more than 90 days past due on any material credit obligation; default risk may impact all credit-sensitive transactions, including loans, securities and derivatives.
- Concentration risk - The risk associated with any single exposure or group of exposures with the potential to produce large enough losses to threaten a bank's core operations. It may arise in the form of single name concentration or industry concentration.
- Country risk - The risk of loss arising from a sovereign state freezing foreign currency payments (transfer/conversion risk) or when it defaults on its obligations (sovereign risk).
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—Germaine Greer (b. 1939)
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“The most threatened group in human societies as in animal societies is the unmated male: the unmated male is more likely to wind up in prison or in an asylum or dead than his mated counterpart. He is less likely to be promoted at work and he is considered a poor credit risk.”
—Germaine Greer (b. 1939)
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