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).
Read more about this topic: Credit Risk
Famous quotes containing the words types of, types, credit and/or risk:
“The wider the range of possibilities we offer children, the more intense will be their motivations and the richer their experiences. We must widen the range of topics and goals, the types of situations we offer and their degree of structure, the kinds and combinations of resources and materials, and the possible interactions with things, peers, and adults.”
—Loris Malaguzzi (1920–1994)
“Science is intimately integrated with the whole social structure and cultural tradition. They mutually support one other—only in certain types of society can science flourish, and conversely without a continuous and healthy development and application of science such a society cannot function properly.”
—Talcott Parsons (1902–1979)
““What are the characteristics of today’s world so that one may recognize it by them?” It pays pensions and borrows money: credit and monuments.”
—Franz Grillparzer (1791–1872)
“Better risk loss of truth than chance of error—that is your faith-vetoer’s exact position. He is actively playing his stake as much as the believer is; he is backing the field against the religious hypothesis, just as the believer is backing the religious hypothesis against the field.”
—William James (1842–1910)