Abstract
Bank’s exposure values are classified by categories on the basis of the borrower or the kind of credit. On every credit a risk weight is applied depending on the risk of the exposure value. The exposure value multiplied by risk weight determines the weighted asset of the bank. This amount determines the regulatory capital a bank needs since the total capital ratio of a bank is defined as the ratio of regulatory capital over the weighted asset. The paper examines the evolution and structure of the exposure values considering the risk weighting of the systemic Greek banks during the crisis period. Due to mergers and acquisitions, these banks cover more than 98% of the Greek banking market by the end of 2016. The paper offers an analysis on a consolidated basis but also through a comparative analysis investigates similarities and differences existing within those banks and during the crisis period. Thus the paper can conclude on the policy followed by banks during the crisis period.
Highlights
Credit risk is the main risk that a bank is subject to; other risks are country risk, foreign exchange risk, interest rate risk, market risk, operational risk, settlement risk, liquidity risk (Wael, 2016)
If we consider the ratio of the risk weighted assets (WA) to the real assets (RA), we observe that the consolidated WA is about half the RA (51%) on average during the examined period, Table 2; during this period, it grew, increasing from 48.9% in 2010 to 55.5% in 2015
Financial crisis has accentuated the process of the risk management strategies and the regulatory disclosures according to Basel II requirements
Summary
Credit risk is the main risk that a bank is subject to; other risks are country risk, foreign exchange risk, interest rate risk, market risk, operational risk, settlement risk, liquidity risk (Wael, 2016). Credit risk is defined as the potential risk that a bank’s borrower or counterparty will fail to meet obligations in accordance to agreed terms and conditions. A bank’s exposure values are classified in categories on the basis of the borrower or the kind of credit. A risk weight is applied to every credit depending on the risk of the exposure value. The exposure value multiplied by risk weight determines the total risk exposure amount.
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