Call for a Global Policy to Confront Risks Facing the International Banking System

Abstract

While financial institutions exploit globalization in the banking system, a natural byproduct of this expansion, the increased risk, affects the internal and external environment of banks and enhances banking probability of failure. This happens because of the fact that every operational activity undertaking by a bank, regardless rate of uncertainty, is associated with some form of risk (Lartey, 2012). The aim of this paper is to indicate the major risks facing international banks, such as: credit risk, liquidity risk, systemic risk, interest rate risk, political risk, market risk and operational risk. While each of them is considered to be manageable, together they represent a clear and present danger to the international banking system (Kirke, 2011). Therefore, to confront those risks, it is suggested to provide a more systemic solution rather than a separate one. There is a call for a global policy to deal with this project as long as the existing risk-specialized policies proved to be insufficient in addressing the main risks in the international banking industry.