unit 6: bank risk management

Unit 6:Unit 6:

Bank Risk ManagementBank Risk Management

Financial EnglishFinancial English

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Unit 6:Unit 6:

• Revision of Unit 5 Revision of Unit 5

• Background information of Unit 6 Background information of Unit 6

• TextText

• ExercisesExercises

• AssignmentAssignment

Review of Unit 5Review of Unit 5

• Dictation

• Exercises Check-upExercises Check-up

Blanks filling

Revision of Text ARevision of Text A

DictationDictation

Dictation!Dictation!

You are going to hear 5 sentences. Each You are going to hear 5 sentences. Each

willwill

be read three times. Write down the sentences be read three times. Write down the sentences

according to what you hear.according to what you hear.

1.1. 2.2. 3.3. 4.4. 5.5.

Check-upCheck-up

Key to Dictation:Key to Dictation:

1.1. Typically a borrower issues a receipt to the lender promising to pay bacTypically a borrower issues a receipt to the lender promising to pay back the capitalk the capital ..

2.2. Trading of currencies and bonds is largely on a bilateral basisTrading of currencies and bonds is largely on a bilateral basis ..

3.3. Banks take deposits from those who have money to save.Banks take deposits from those who have money to save.

4.4. Today’s financial crisis is described the current financial crisis as an eveToday’s financial crisis is described the current financial crisis as an even that occurs once in 100 years.n that occurs once in 100 years.

5.5. The Bank of Japan assigned $25 billion to maintain the liquidity of the JThe Bank of Japan assigned $25 billion to maintain the liquidity of the Japanese market. The government of the country also held a special meetapanese market. The government of the country also held a special meeting with the participation of the chairman of the nation’s central bank aing with the participation of the chairman of the nation’s central bank and ministers for economy and finance.nd ministers for economy and finance.

DictationDictation

II. Fill in the blanks.II. Fill in the blanks.

Check-upCheck-up

1.Home loans are available for____________ like buying a 1.Home loans are available for____________ like buying a

luxurious new house or a new car, etc. Student loan as it itself luxurious new house or a new car, etc. Student loan as it itself

shows is that it is provided basically to students for _______. shows is that it is provided basically to students for _______.

Students who want to study more but can not _______can get Students who want to study more but can not _______can get

apply for such loans and continue their studies.apply for such loans and continue their studies.

2.When a banker evaluates a borrower’s character, he likes to 2.When a banker evaluates a borrower’s character, he likes to

see the latter’s ties to the community such as long residence, see the latter’s ties to the community such as long residence,

_____________and ________________._____________and ________________.

1.Home loans are available for____________ like buying a 1.Home loans are available for____________ like buying a

luxurious new house or a new car, etc. Student loan as it itself luxurious new house or a new car, etc. Student loan as it itself

shows is that it is provided basically to students for _______. shows is that it is provided basically to students for _______.

Students who want to study more but can not _______can get Students who want to study more but can not _______can get

apply for such loans and continue their studies.apply for such loans and continue their studies.


see the latter’s ties to the community such as long residence, see the latter’s ties to the community such as long residence,

_____________and ________________._____________and ________________.

3. While applying for a loan, current assets such as________ 3. While applying for a loan, current assets such as________

or goods can increase your loan chances. or goods can increase your loan chances.

4. If you want to get a loan, there is a tip you should follow: fi4. If you want to get a loan, there is a tip you should follow: fi

rst ________ by phone. Ask the receptionist in the bank or the lrst ________ by phone. Ask the receptionist in the bank or the l

oan department for _________who would handle your loan reqoan department for _________who would handle your loan req

uest. Of course it would be better, but not necessary to get a __uest. Of course it would be better, but not necessary to get a __

_________from a friend or advisor such as your lawyer or acco_________from a friend or advisor such as your lawyer or acco

untant. untant.

Check-upCheck-up

1.Home loans are available for1.Home loans are available for general home purposesgeneral home purposes like like

buying a luxurious new house or a new car, etc. Student buying a luxurious new house or a new car, etc. Student

loan as it itself shows is that it is provided basically to loan as it itself shows is that it is provided basically to

students forstudents for higher educationhigher education. Students who want to study . Students who want to study

more but can not more but can not affordafford can get apply for such loans and can get apply for such loans and

continue their studies.continue their studies.


see the latter’s ties to the community such as long see the latter’s ties to the community such as long

residence, residence, family tiesfamily ties and and home ownershiphome ownership. .

Check-upCheck-up

Check-upCheck-up

3. While applying for a loan, current assets such as3. While applying for a loan, current assets such as inventoryinventory

or goods can increase your loan chances.or goods can increase your loan chances.

4. If you want to get a loan, there is a tip you should follow: 4. If you want to get a loan, there is a tip you should follow:

first first make an appointmentmake an appointment by phone. Ask the receptionist by phone. Ask the receptionist

in the bank or the loan department for in the bank or the loan department for the name of thethe name of the

appropriate personappropriate person who would handle your loan request. who would handle your loan request.

Of course it would be better, but not necessary, to get a Of course it would be better, but not necessary, to get a

referral referral from a friend or advisor such as your lawyer or from a friend or advisor such as your lawyer or

accountant. accountant.

Unit 6:Unit 6:

• Revision of Unit 5Revision of Unit 5

• Background information of Unit 6 information of Unit 6

• Text

• Assignment

Unit 6:Unit 6:

• Part I:

• 6.1 Brief Introduction

• Part II:

• 6.2 Key Risk Management

Text : Background InformationText : Background Information

本文旨在介绍银行运营过程中常见的几种风险，以及相应的应对措施。自有资本占比低这一特点决定了银行本身具有较强的内在风险性。而各国内外部的经济环境的复杂性使得银行更加无法摆脱各种风险的威胁。这就对银行风险管理提出了更高的要求。主要的银行风险包括信贷风险、市场风险、（上述两种风险重点讲授）利率风险、操作风险等。不同的风险有不同的表现形式，本章主要介绍上述几种风险的防范及管理措施。当然，随着经济的发展，新情况不断涌现，银行业还可能面临更多更大的风险。

本文旨在介绍银行运营过程中常见的几种风险，以及相应的应对措施。自有资本占比低这一特点决定了银行本身具有较强的内在风险性。而各国内外部的经济环境的复杂性使得银行更加无法摆脱各种风险的威胁。这就对银行风险管理提出了更高的要求。主要的银行风险包括信贷风险、市场风险、（上述两种风险重点讲授）利率风险、操作风险等。不同的风险有不同的表现形式，本章主要介绍上述几种风险的防范及管理措施。当然，随着经济的发展，新情况不断涌现，银行业还可能面临更多更大的风险。


本章重点难点 :

通过本章学习，学生应该掌握

1. 银行运营过程中常见的五种风险

2. 应对上述五种风险的措施

本章重点难点 :

通过本章学习，学生应该掌握

1. 银行运营过程中常见的五种风险

2. 应对上述五种风险的措施


表内业务就是指在资产负债表上反映的业务。比如银行存款、贷款等。

表内业务就是指在资产负债表上反映的业务。比如银行存款、贷款等。


表外业务表外业务是指商业银行所从事的、按照现行的会是指商业银行所从事的、按照现行的会计准则不记入资产负债表内、不形成现实资产负债计准则不记入资产负债表内、不形成现实资产负债但能增加银行收益的业务。表外业务是有风险的经但能增加银行收益的业务。表外业务是有风险的经营活动，形成银行的或有资产和或有负债，其中一营活动，形成银行的或有资产和或有负债，其中一部分还有可能转变为银行的实有资产和实有负债，部分还有可能转变为银行的实有资产和实有负债，故通常要求在会计报表的附注中予以揭示故通常要求在会计报表的附注中予以揭示。。

表外业务表外业务是指商业银行所从事的、按照现行的会是指商业银行所从事的、按照现行的会计准则不记入资产负债表内、不形成现实资产负债计准则不记入资产负债表内、不形成现实资产负债但能增加银行收益的业务。表外业务是有风险的经但能增加银行收益的业务。表外业务是有风险的经营活动，形成银行的或有资产和或有负债，其中一营活动，形成银行的或有资产和或有负债，其中一部分还有可能转变为银行的实有资产和实有负债，部分还有可能转变为银行的实有资产和实有负债，故通常要求在会计报表的附注中予以揭示故通常要求在会计报表的附注中予以揭示。。


期权性风险期权性风险是一种越来越重要的利率风险，来源是一种越来越重要的利率风险，来源于银行资产、负债和表外业务中所隐含的期权。一于银行资产、负债和表外业务中所隐含的期权。一般而言，期权赋予其持有者买入、卖出或以某种方般而言，期权赋予其持有者买入、卖出或以某种方式改变某一金融工具或金融合同的现金流量的权利，式改变某一金融工具或金融合同的现金流量的权利，而非义务而非义务。。

期权性风险期权性风险是一种越来越重要的利率风险，来源是一种越来越重要的利率风险，来源于银行资产、负债和表外业务中所隐含的期权。一于银行资产、负债和表外业务中所隐含的期权。一般而言，期权赋予其持有者买入、卖出或以某种方般而言，期权赋予其持有者买入、卖出或以某种方式改变某一金融工具或金融合同的现金流量的权利，式改变某一金融工具或金融合同的现金流量的权利，而非义务而非义务。。


流动风险流动风险是指出借方是指出借方 (( 贷款方贷款方 )) 想要收回多于想要收回多于速动资产所能提供的资金时产生的风险速动资产所能提供的资金时产生的风险。。

流动风险流动风险是指出借方是指出借方 (( 贷款方贷款方 )) 想要收回多于想要收回多于速动资产所能提供的资金时产生的风险速动资产所能提供的资金时产生的风险。。

• ListeningListening

• Language Points

TextText

ListeningListening

TextText



Listen carefully to the first part of the text and then Listen carefully to the first part of the text and then try to translate it. try to translate it.


6.1 6.1 Brief Introduction Brief Introduction

We are indeed witnessing dramatic shifts in the structure of fiWe are indeed witnessing dramatic shifts in the structure of financial markets all over the world in recent years. Since the sumnancial markets all over the world in recent years. Since the summer of 2007, there had been a continuous deterioration of conditiomer of 2007, there had been a continuous deterioration of conditions in financial markets. For instance, we have seen significant ns in financial markets. For instance, we have seen significant disruption in several key sectors of our financial system, such as no in several key sectors of our financial system, such as normally creditworthy companies having difficulty issuing commercrmally creditworthy companies having difficulty issuing commercial paper, dramatic increases in interbank lending rates, and signiial paper, dramatic increases in interbank lending rates, and significant concerns about money market funds "breaking the buck." ficant concerns about money market funds "breaking the buck."

Text :Text :

As a result of these ongoing As a result of these ongoing upheavals, we are experienci, we are experienci

ng substantial institutional changes, in which some long-stanng substantial institutional changes, in which some long-stan

ding financial institutions have either failed, sought governmding financial institutions have either failed, sought governm

ent assistance, or were forced to merge with other institutionent assistance, or were forced to merge with other institution

s.s.

Text :Text :

A number of studies analyzing the causes of the current A number of studies analyzing the causes of the current turmoil impute shortcomings in the risk management practices o shortcomings in the risk management practices of financial institutions. It is f financial institutions. It is absolutely clear that many financial clear that many financial institutions need to undertake a institutions need to undertake a fundamental review of risk man review of risk management. They now realize that ignoring risk management in aagement. They now realize that ignoring risk management in any aspect of the banking business usually creates problems lateny aspect of the banking business usually creates problems later on. Risk management shortcomings need to be addressed not r on. Risk management shortcomings need to be addressed not only to improve the health and viability of individual institutioonly to improve the health and viability of individual institutions, but also to maintain stability for the financial system as a wns, but also to maintain stability for the financial system as a whole.hole.

Text B:Text B:

Banking, by its nature, entails taking a wide array of Banking, by its nature, entails taking a wide array of

risks. Banks need to understand these risks as well as adrisks. Banks need to understand these risks as well as ad

equately measure and manage them. The key risks faced equately measure and manage them. The key risks faced

by banks as well as how to manage the risks will be discby banks as well as how to manage the risks will be disc

ussed below.ussed below.

Text B:Text B:

Text : Language PointsText : Language Points

disruption n. disruption n. 中断中断 , , 分裂分裂 , , 瓦解瓦解 , , 破坏破坏

1. a disruption of telephone service during the hurricane1. a disruption of telephone service during the hurricane

飓风中电话的中断飓风中电话的中断 ..

2. The state was in disruption. 2. The state was in disruption. 国家处于分崩离析之中国家处于分崩离析之中 ..

3. These were the products of the disruption of the united front of 3. These were the products of the disruption of the united front of

the two parties. the two parties. 这是两党统一战线破裂了的结果这是两党统一战线破裂了的结果 . .

disruption n. disruption n. 中断中断 , , 分裂分裂 , , 瓦解瓦解 , , 破坏破坏

1. a disruption of telephone service during the hurricane1. a disruption of telephone service during the hurricane

飓风中电话的中断飓风中电话的中断 ..

2. The state was in disruption. 2. The state was in disruption. 国家处于分崩离析之中国家处于分崩离析之中 ..

3. These were the products of the disruption of the united front of 3. These were the products of the disruption of the united front of

the two parties. the two parties. 这是两党统一战线破裂了的结果这是两党统一战线破裂了的结果 . .

upheaval n. upheaval n. 动乱动乱 ; ; 大变动大变动

1. It was faced with the greatest social upheaval since World 1. It was faced with the greatest social upheaval since World

War ll. War ll.

它面临第二次世界大战以来最大的社会动乱。它面临第二次世界大战以来最大的社会动乱。

2. The development of science, especially that of electric indus2. The development of science, especially that of electric indus

try brings about the upheaval of the industrial look. try brings about the upheaval of the industrial look.

科学的发展科学的发展 ,, 特别是电子工业的发展特别是电子工业的发展 ,, 使工业的面貌发生了使工业的面貌发生了巨大的变化。巨大的变化。


turmoilturmoil n. n. 骚乱骚乱

currency turmoil currency turmoil 货币混乱货币混乱

1. The London Stock Exchange is in turmoil today. 1. The London Stock Exchange is in turmoil today.

今天伦敦证券市场一片混乱。今天伦敦证券市场一片混乱。

2. This turmoil has been a lesson to us. 2. This turmoil has been a lesson to us.

这次动乱从反面教育了我们。这次动乱从反面教育了我们。



impute vt.impute vt. 把把 ...... 归咎归咎 [[ 归罪归罪 ]] 于于 ; ; 把把 ...... 归因于归因于 ; ; 把把 ...... 转嫁转嫁于于

1. I impute his failure to laziness. 1. I impute his failure to laziness.

我把他的失败归咎于他的懒惰。我把他的失败归咎于他的懒惰。

2. They imputed the accident to the driver's carelessness. 2. They imputed the accident to the driver's carelessness.

他们把这次车祸归咎于他们把这次车祸归咎于司机的疏忽。司机的疏忽。

impute vt.impute vt. 把把 ...... 归咎归咎 [[ 归罪归罪 ]] 于于 ; ; 把把 ...... 归因于归因于 ; ; 把把 ...... 转嫁转嫁于于

1. I impute his failure to laziness. 1. I impute his failure to laziness.

我把他的失败归咎于他的懒惰。我把他的失败归咎于他的懒惰。

2. They imputed the accident to the driver's carelessness. 2. They imputed the accident to the driver's carelessness.

他们把这次车祸归咎于他们把这次车祸归咎于司机的疏忽。司机的疏忽。


absolutely adv.absolutely adv. 完全地完全地 ;; 肯定地肯定地 ; ; 绝对地绝对地

1. He is absolutely wrong.

他完全错了。

2. It's absolutely impossible.

这绝对不可能。

absolutely adv.absolutely adv. 完全地完全地 ;; 肯定地肯定地 ; ; 绝对地绝对地

1. He is absolutely wrong.

他完全错了。

2. It's absolutely impossible.

这绝对不可能。


fundamental adj.fundamental adj. 基础的基础的 , , 基本的基本的 , , 根本的根本的 ; ; 原始的原始的 ,, 初初级阶段的级阶段的 ;;

1. a fundamental change 1. a fundamental change

根本变化根本变化

2. the fundamental rules of grammar 2. the fundamental rules of grammar

语法的基本规则语法的基本规则

3. The research is at it’s fundamental stage.3. The research is at it’s fundamental stage.

研究正处于初级阶段。研究正处于初级阶段。

fundamental adj.fundamental adj. 基础的基础的 , , 基本的基本的 , , 根本的根本的 ; ; 原始的原始的 ,, 初初级阶段的级阶段的 ;;

1. a fundamental change 1. a fundamental change

根本变化根本变化

2. the fundamental rules of grammar 2. the fundamental rules of grammar

语法的基本规则语法的基本规则

3. The research is at it’s fundamental stage.3. The research is at it’s fundamental stage.

研究正处于初级阶段。研究正处于初级阶段。

ListeningListening

TextText

6.2 6.2 Key Risk ManagementKey Risk Management 6.2 6.2 Key Risk ManagementKey Risk Management

Listen carefully to the second part of the text and Listen carefully to the second part of the text and then try to translate it. then try to translate it.

9.2 9.2 Key Risk ManagementKey Risk Management

CREDIT RISK MANAGEMENTCREDIT RISK MANAGEMENT

The The extension of loans is the primary activity of most banks. Le of loans is the primary activity of most banks. Le

nding activities require banks to make judgments nding activities require banks to make judgments related to the the

creditworthiness of borrowers. These judgments do not always creditworthiness of borrowers. These judgments do not always

prove to be prove to be accurate and the creditworthiness of a borrower ma and the creditworthiness of a borrower ma

y decline over time due to various factors. Consequently, a majy decline over time due to various factors. Consequently, a maj

or risk that banks face is credit risk or the failure of a counterpor risk that banks face is credit risk or the failure of a counterp

arty to perform according to a contractual arrangement.arty to perform according to a contractual arrangement.


This risk This risk applies not only not only toto loans but to other on- and off-balan loans but to other on- and off-balan

ce sheet exposures such as guarantees, acceptances and securitice sheet exposures such as guarantees, acceptances and securiti

es investments. Serious banking problems have arisen from the es investments. Serious banking problems have arisen from the

failure of banks to recognize impaired assets, to create reserves failure of banks to recognize impaired assets, to create reserves

for writing off these assets, and to for writing off these assets, and to suspend recognition of intere recognition of intere

st income when appropriatest income when appropriate


Large exposures to a single borrower, or to a group of related Large exposures to a single borrower, or to a group of related

borrowers are a common cause of banking problems in that tborrowers are a common cause of banking problems in that t

hey represent a credit risk concentration. Large concentrationhey represent a credit risk concentration. Large concentration

s can also arise with s can also arise with respect to particular industries, economic particular industries, economic

sectors, or geographical regions or by having sets of loans witsectors, or geographical regions or by having sets of loans wit

h other characteristics that make them h other characteristics that make them vulnerable to the same to the same

economic factors (e.g., highly-leveraged transactions).economic factors (e.g., highly-leveraged transactions).


To evaluate the credit risk, banks must first obtain certain basiTo evaluate the credit risk, banks must first obtain certain basic information that usually is available in a meeting with the c information that usually is available in a meeting with the potential borrower, such as the integrity of the borrower, his ab borrower, such as the integrity of the borrower, his ability to repay and his financial position, how much money is beiility to repay and his financial position, how much money is being sought, the purpose of the loan, how long it is needed, and hng sought, the purpose of the loan, how long it is needed, and how it will be repaid, etc. Each part of this information should how it will be repaid, etc. Each part of this information should have a reasonable relationship to the other parts. For example, a ave a reasonable relationship to the other parts. For example, a company seeking loan to conduct coffee importation business wcompany seeking loan to conduct coffee importation business will only need three-month financing.ill only need three-month financing.


Since the normal period of time for the company to ship and prSince the normal period of time for the company to ship and process the materials as well as to sell the finished products to a cocess the materials as well as to sell the finished products to a coffee company will be within 90 days. So if the company seek a offee company will be within 90 days. So if the company seek a three-year loan to conduct the business, it will be highly unreasthree-year loan to conduct the business, it will be highly unreasonable. For this, banks are required to establish objective credionable. For this, banks are required to establish objective credit and investment function which are grounded in sound principt and investment function which are grounded in sound principles, meanwhile the maintenance of prudent written lending poliles, meanwhile the maintenance of prudent written lending policies, loan approval and administration procedures, and appropcies, loan approval and administration procedures, and appropriate loan documentation are riate loan documentation are essential to a bank's management to a bank's management of the lending function.of the lending function.


Banks should also have a well-developed process for ongoing mBanks should also have a well-developed process for ongoing m

onitoring of credit relationships, including the financial conditionitoring of credit relationships, including the financial conditi

on of borrowers. A key element of any management informatioon of borrowers. A key element of any management informatio

n system should be a data base that provides essential details on system should be a data base that provides essential details o

n the condition of the loan portfolio, including internal loan gran the condition of the loan portfolio, including internal loan gra

ding and classifications. When guarantees or collateral are proding and classifications. When guarantees or collateral are pro

vided, the bank should have a vided, the bank should have a mechanism in place for continuall in place for continuall

y assessing the strength of these guarantees and appraising the y assessing the strength of these guarantees and appraising the

worth of the collateral.worth of the collateral.


Lastly, banks can deal with the credit risk by credit rationing. Lastly, banks can deal with the credit risk by credit rationing.

That is, banks refuse to make loans even though borrowers are That is, banks refuse to make loans even though borrowers are

willing to pay the stated interest rate or even a higher rate. willing to pay the stated interest rate or even a higher rate.

Credit rationing takes two forms. The first occurs when a Credit rationing takes two forms. The first occurs when a

lender refuses to make a loan of any amount to a borrower lender refuses to make a loan of any amount to a borrower

even if the borrower is willing to pay a higher interest rate. The even if the borrower is willing to pay a higher interest rate. The

second occurs when a lender is willing to make a loan but second occurs when a lender is willing to make a loan but

restricts the size of the loan to less than the borrower would restricts the size of the loan to less than the borrower would

like.like.


You may be puzzled by the first type of credit rationing. Even if You may be puzzled by the first type of credit rationing. Even if the potential borrower is a credit risk, the bank may extend the the potential borrower is a credit risk, the bank may extend the loan but at a higher interest. Is that what you think? In fact, loan but at a higher interest. Is that what you think? In fact, borrowers with the riskiest investment projects are exactly those borrowers with the riskiest investment projects are exactly those that are willing to pay the highest interest rates. If the borrower that are willing to pay the highest interest rates. If the borrower took on a high-risk investment and succeeded, the borrower took on a high-risk investment and succeeded, the borrower would become extremely rich. But a lender wouldn’t want to would become extremely rich. But a lender wouldn’t want to make such a loan precisely because the investment risk is high. make such a loan precisely because the investment risk is high. The likely outcome is that the borrower will not succeed and the The likely outcome is that the borrower will not succeed and the lender will not be paid back. So the bank would therefore rather lender will not be paid back. So the bank would therefore rather not make any loans at a higher interest rate.not make any loans at a higher interest rate.


Generally speaking, the larger the loans, the greater possibilities tGenerally speaking, the larger the loans, the greater possibilities to the o the occurrence of credit risk. If a bank gives you a 20,000 yuan lo of credit risk. If a bank gives you a 20,000 yuan loan, you are likely to take actions that enable you to pay it back bean, you are likely to take actions that enable you to pay it back because you don’t want to hurt your credit rating for the future. Hocause you don’t want to hurt your credit rating for the future. However, if the bank lends you 10 billion yuan, you are more like to wever, if the bank lends you 10 billion yuan, you are more like to go to Macao for gambling. The larger your loan, the greater your go to Macao for gambling. The larger your loan, the greater your incentives to engage in activities that make it less likely that you wincentives to engage in activities that make it less likely that you will repay the loan. Since more borrower repay their loans if the loaill repay the loan. Since more borrower repay their loans if the loan amounts are small, financial institution ration credit by providin amounts are small, financial institution ration credit by providing borrowers with smaller loans than they seek, thus to some exteng borrowers with smaller loans than they seek, thus to some extent to avoid credit risks .nt to avoid credit risks .


MARKET RISK MANAGEMENTMARKET RISK MANAGEMENT

Banks face a risk of losses in on- and off-balance sheet positions Banks face a risk of losses in on- and off-balance sheet positions arising from movements in market prices. Established accounting arising from movements in market prices. Established accounting principles cause these risks to be typically most visible in a bank's principles cause these risks to be typically most visible in a bank's trading activities, whether they involve debt or equity trading activities, whether they involve debt or equity instruments, or foreign exchange or commodity positions. One instruments, or foreign exchange or commodity positions. One specific element of market risk is foreign exchange risk. Banks act specific element of market risk is foreign exchange risk. Banks act as "market-makers" in foreign exchange by quoting rates to their as "market-makers" in foreign exchange by quoting rates to their customers and by taking open positions in currencies. The risks customers and by taking open positions in currencies. The risks inherent in foreign exchange business, particularly in running inherent in foreign exchange business, particularly in running open foreign exchange positions, are increased during periods of open foreign exchange positions, are increased during periods of instability in exchange rates.instability in exchange rates.


To finance trade without any financial risk requires obtaining a rate iTo finance trade without any financial risk requires obtaining a rate in advance at which the cash flows in each currency, for every date, can advance at which the cash flows in each currency, for every date, can be matched. More specifically, covering the rate risk requires obtain be matched. More specifically, covering the rate risk requires obtaining financing for the complete duration of the financing need. Coverning financing for the complete duration of the financing need. Covering the exchange risk involves obtaining a rate at which the conversioing the exchange risk involves obtaining a rate at which the conversion of currencies will eventually be made. The financing and the exchann of currencies will eventually be made. The financing and the exchange risk problems can be solved ge risk problems can be solved simultaneously by denominating the fi by denominating the financing in the currency of the expected inflows and borrowing an amnancing in the currency of the expected inflows and borrowing an amount equal to the total inflows. Alternatively, the financing may be doount equal to the total inflows. Alternatively, the financing may be done for the required amount and time in any currency, while the exchane for the required amount and time in any currency, while the exchange risk is covered in the forward market by selling the inflow currennge risk is covered in the forward market by selling the inflow currency against the outflow currency for the specific dates when the inflowcy against the outflow currency for the specific dates when the inflows are expected.s are expected.


In addition, banks should posses the ability to accurately measuIn addition, banks should posses the ability to accurately measure and adequately control market risks. Where there is a potentire and adequately control market risks. Where there is a potential risk, banks should provide an explicit capital cushion for the al risk, banks should provide an explicit capital cushion for the price risks to which banks are exposed, particularly those arisinprice risks to which banks are exposed, particularly those arising from their trading activities. Introducing the discipline that cag from their trading activities. Introducing the discipline that capital requirements impose can be an important further step in spital requirements impose can be an important further step in strengthening the soundness and trengthening the soundness and stability of financial markets. T of financial markets. There should also be well-structured quantitative and qualitative here should also be well-structured quantitative and qualitative standards for the risk management process related to market ristandards for the risk management process related to market risk. Bank management should have set sk. Bank management should have set appropriate limits and im limits and implemented adequate internal controls for their foreign exchange plemented adequate internal controls for their foreign exchange business.business.


LIQUIDITY RISK MANAGEMENTLIQUIDITY RISK MANAGEMENT

Liquidity risk arises from the inability of a bank to Liquidity risk arises from the inability of a bank to

accommodate decreases in liabilities or to fund increases in accommodate decreases in liabilities or to fund increases in

assets. When a bank has inadequate liquidity, it cannot obtain assets. When a bank has inadequate liquidity, it cannot obtain

sufficient funds, either by increasing liabilities or by sufficient funds, either by increasing liabilities or by

converting assets promptly, at a reasonable cost, thereby converting assets promptly, at a reasonable cost, thereby

affecting profitability. In extreme cases, insufficient liquidity affecting profitability. In extreme cases, insufficient liquidity

can lead to the insolvency of a bank.can lead to the insolvency of a bank.


Therefore, liquidity risk management is of paramount importaTherefore, liquidity risk management is of paramount importance. A liquidity nce. A liquidity shortfall at a single institution can have system- at a single institution can have system-wide repercussions. Financial market developments in the past wide repercussions. Financial market developments in the past decade have increased the decade have increased the complexity of liquidity risk and its of liquidity risk and its management. The market turmoil that began in mid-2007 re-emanagement. The market turmoil that began in mid-2007 re-emphasized the importance of liquidity to the functioning of finmphasized the importance of liquidity to the functioning of financial markets and the banking sector. In advance of the turmancial markets and the banking sector. In advance of the turmoil, asset markets were buoyant and funding was readily availaoil, asset markets were buoyant and funding was readily available at low cost. The reversal in market conditions illustrated hble at low cost. The reversal in market conditions illustrated how quickly liquidity can evaporate and that illiquidity can last ow quickly liquidity can evaporate and that illiquidity can last for an extended period of time.for an extended period of time.


The purpose of liquidity management is to ensure that the banThe purpose of liquidity management is to ensure that the bank is able to meet fully its contractual commitments. Crucial elek is able to meet fully its contractual commitments. Crucial elements of strong liquidity management include good managemements of strong liquidity management include good management information systems, central liquidity control, analysis of nent information systems, central liquidity control, analysis of net funding requirements under t funding requirements under alternative scenarios, diversificati scenarios, diversification of funding sources, and contingency planning. On the other on of funding sources, and contingency planning. On the other hand, banks should manage their assets, liabilities and off-balahand, banks should manage their assets, liabilities and off-balance sheet contracts with a view to maintaining adequate liquidince sheet contracts with a view to maintaining adequate liquidity. Banks should have a diversified funding base, both in terms ty. Banks should have a diversified funding base, both in terms of sources of funds and the maturity of sources of funds and the maturity breakdown of the liabilities. of the liabilities. They should also maintain an adequate level of liquid assets. They should also maintain an adequate level of liquid assets.


INTEREST RATE RISK MANAGEMENTINTEREST RATE RISK MANAGEMENT

Interest rate risk refers to the exposure of a bank's financial coInterest rate risk refers to the exposure of a bank's financial condition to ndition to adverse movements in interest rates. This risk impact movements in interest rates. This risk impacts both the earnings of a bank and the economic value of its asses both the earnings of a bank and the economic value of its assets, liabilities and off-balance sheet instruments. The primary fots, liabilities and off-balance sheet instruments. The primary forms of interest rate risk to which banks are typically exposed arms of interest rate risk to which banks are typically exposed are: (1) repricing risk, which arises from timing differences in thre: (1) repricing risk, which arises from timing differences in the maturity (for fixed rate) and repricing (for floating rate) of be maturity (for fixed rate) and repricing (for floating rate) of bank assets, liabilities and off-balance sheet positions;ank assets, liabilities and off-balance sheet positions; (2) yield c(2) yield curve risk, which arises from changes in the slope and shape of turve risk, which arises from changes in the slope and shape of the yield curve;he yield curve;


(3) basis risk, which arises from imperfect correlation in the ad(3) basis risk, which arises from imperfect correlation in the adjustment of the rates earned and paid on different instruments justment of the rates earned and paid on different instruments with otherwise similar repricing characteristics; and (4) optionwith otherwise similar repricing characteristics; and (4) optionality, which arises from the express or implied options imbeddeality, which arises from the express or implied options imbedded in many bank assets, liabilities and off-balance sheet portfoliod in many bank assets, liabilities and off-balance sheet portfolios.s.

Although such risk is a normal part of banking, excessive interAlthough such risk is a normal part of banking, excessive interest rate risk can pose a significant threat to a bank's earnings aest rate risk can pose a significant threat to a bank's earnings and capital base. Managing this risk is of growing importance in nd capital base. Managing this risk is of growing importance in sophisticated financial markets where customers actively manasophisticated financial markets where customers actively manage their interest rate exposure.ge their interest rate exposure.


Banks should have systematic and effective control over interBanks should have systematic and effective control over inter

est rate risk, including effective board and senior managemenest rate risk, including effective board and senior managemen

t t oversight, adequate risk management policies and procedure, adequate risk management policies and procedure

s, risk measurement and monitoring systems, and comprehens, risk measurement and monitoring systems, and comprehen

sive controls. In addition, Banks should submit sufficient and sive controls. In addition, Banks should submit sufficient and

timely information to supervisors who can in return help thetimely information to supervisors who can in return help the

m to evaluate the level of interest rate risk.m to evaluate the level of interest rate risk.


OPERATIONAL RISK MANAGEMENTOPERATIONAL RISK MANAGEMENT

The most important types of operational risk involve breakdowThe most important types of operational risk involve breakdowns in internal controls and corporate governance. Such breakdns in internal controls and corporate governance. Such breakdowns can lead to financial losses through error, fraud, or failurowns can lead to financial losses through error, fraud, or failure to perform in a timely manner or cause the interests of the bae to perform in a timely manner or cause the interests of the bank to be compromised in some other way, for example, by its denk to be compromised in some other way, for example, by its dealers, lending officers or other staff exceeding their authority oalers, lending officers or other staff exceeding their authority or conducting business in an unethical or risky manner. Other ar conducting business in an unethical or risky manner. Other aspects of spects of operational risk include major failure of information te risk include major failure of information technology systems or events such as major fires or other disasterchnology systems or events such as major fires or other disasters.s.


For this, the senior management of banks should work out and For this, the senior management of banks should work out and

execute effective internal control and auditing procedures as wexecute effective internal control and auditing procedures as w

ell as have policies for managing or mitigating operational risk ell as have policies for managing or mitigating operational risk

(by insurance or contingency planning). For the risks from tech(by insurance or contingency planning). For the risks from tech

nological failures or nological failures or unexpected events, banks should have adeq events, banks should have adeq

uate and well-tested business resumption plans for all major syuate and well-tested business resumption plans for all major sy

stems, with remote site facilities, to protect against such events.stems, with remote site facilities, to protect against such events.


extension n. extension n. 扩大，伸展；延长，延期；普及，推广扩大，伸展；延长，延期；普及，推广


1.the extension of our foreign trade 1.the extension of our foreign trade

我国外贸的扩大我国外贸的扩大

2.the extension of a loan 2.the extension of a loan

借款的延期偿还借款的延期偿还

3.the extension of education among the peasants 3.the extension of education among the peasants

农民教育的普及农民教育的普及

1.the extension of our foreign trade 1.the extension of our foreign trade

我国外贸的扩大我国外贸的扩大

2.the extension of a loan 2.the extension of a loan

借款的延期偿还借款的延期偿还

3.the extension of education among the peasants 3.the extension of education among the peasants

农民教育的普及农民教育的普及

related to related to 涉及涉及 ; ; 与与 ---- 相关的相关的 ;;和和 ---- 相处相处


1.My success relates to his help.1.My success relates to his help.

我的成功与他的帮助分不开。我的成功与他的帮助分不开。

2.She found it difficult to relate to her roommate. 2.She found it difficult to relate to her roommate.

他发现同屋的人难相处。他发现同屋的人难相处。

1.My success relates to his help.1.My success relates to his help.

我的成功与他的帮助分不开。我的成功与他的帮助分不开。

2.She found it difficult to relate to her roommate. 2.She found it difficult to relate to her roommate.

他发现同屋的人难相处。他发现同屋的人难相处。

accurate adj. accurate adj. 准确的准确的 , , 精密的精密的 ; ; 精确的精确的


1.She gave an accurate account of the accident.

她对事故做了准确的描述。

2.The accounting is accurate 。

计算非常精确。计算非常精确。

3.an extremely accurate micrometer3.an extremely accurate micrometer

一种精度极高的测微计一种精度极高的测微计 ((超测微计超测微计 ))

1.She gave an accurate account of the accident.

她对事故做了准确的描述。

2.The accounting is accurate 。

计算非常精确。计算非常精确。

3.an extremely accurate micrometer3.an extremely accurate micrometer

一种精度极高的测微计一种精度极高的测微计 ((超测微计超测微计 ))


apply to apply to 应用于；向应用于；向 ----申请申请

1. Apply high technology to production. 1. Apply high technology to production.

高新技术产业化高新技术产业化

2. I will apply to college. 2. I will apply to college.

申请上大学申请上大学

apply to apply to 应用于；向应用于；向 ----申请申请

1. Apply high technology to production. 1. Apply high technology to production.

高新技术产业化高新技术产业化

2. I will apply to college. 2. I will apply to college.

申请上大学申请上大学

suspend vt. suspend vt. 吊起吊起 , , 悬挂；推迟、缓期；中止悬挂；推迟、缓期；中止 , , 暂停暂停


1.To suspend in a liquid. 1.To suspend in a liquid.

使悬浮在液体中使悬浮在液体中

2.The management decided to suspend negotiation. 2.The management decided to suspend negotiation.

管理部门决定中止谈判。管理部门决定中止谈判。

3.Tom is suspended from school for a week for bad conduct. 3.Tom is suspended from school for a week for bad conduct.

汤姆因为行为不端被停学一周。汤姆因为行为不端被停学一周。

4.The sentence was two years’ hard labor suspended for a year. 4.The sentence was two years’ hard labor suspended for a year.

判处劳教两年判处劳教两年 , , 缓期执行一年。缓期执行一年。

1.To suspend in a liquid. 1.To suspend in a liquid.

使悬浮在液体中使悬浮在液体中

2.The management decided to suspend negotiation. 2.The management decided to suspend negotiation.

管理部门决定中止谈判。管理部门决定中止谈判。

3.Tom is suspended from school for a week for bad conduct. 3.Tom is suspended from school for a week for bad conduct.

汤姆因为行为不端被停学一周。汤姆因为行为不端被停学一周。

4.The sentence was two years’ hard labor suspended for a year. 4.The sentence was two years’ hard labor suspended for a year.

判处劳教两年判处劳教两年 , , 缓期执行一年。缓期执行一年。

respect torespect to 关于；尊敬；考虑，重视关于；尊敬；考虑，重视


1.It is not invariant with respect to direction. 1.It is not invariant with respect to direction.

在方向方面不是始终如一的在方向方面不是始终如一的。。

2.I promise to respect your wishes. 2.I promise to respect your wishes.

我保证尊重你的意愿我保证尊重你的意愿。。

3.We should give more respect to bad students.3.We should give more respect to bad students.

我们更应关注那些所谓的“坏”学生。我们更应关注那些所谓的“坏”学生。

1.It is not invariant with respect to direction. 1.It is not invariant with respect to direction.

在方向方面不是始终如一的在方向方面不是始终如一的。。

2.I promise to respect your wishes. 2.I promise to respect your wishes.

我保证尊重你的意愿我保证尊重你的意愿。。

3.We should give more respect to bad students.3.We should give more respect to bad students.

我们更应关注那些所谓的“坏”学生。我们更应关注那些所谓的“坏”学生。

vulnerable adj. vulnerable adj. 易受伤害的易受伤害的 , , 有弱点的有弱点的 , , 易受影响的易受影响的 , , 脆弱脆弱的的


1.He is vulnerable to 1.He is vulnerable to

他是容易受到诱惑的。他是容易受到诱惑的。

2.They young girl looked very vulnerable. 2.They young girl looked very vulnerable.

那姑娘看上去十分柔弱。那姑娘看上去十分柔弱。

3.The potato is vulnerable to several pests. 3.The potato is vulnerable to several pests.

马铃薯易受几种害虫的侵害。马铃薯易受几种害虫的侵害。

1.He is vulnerable to 1.He is vulnerable to

他是容易受到诱惑的。他是容易受到诱惑的。

2.They young girl looked very vulnerable. 2.They young girl looked very vulnerable.

那姑娘看上去十分柔弱。那姑娘看上去十分柔弱。

3.The potato is vulnerable to several pests. 3.The potato is vulnerable to several pests.

马铃薯易受几种害虫的侵害。马铃薯易受几种害虫的侵害。

potential adj. potential adj. 可能的，潜在的可能的，潜在的


1. Every seed is a potential plant. 1. Every seed is a potential plant.

每粒种子都可能长成植物。每粒种子都可能长成植物。

2. Knowledge is only potential power. 2. Knowledge is only potential power.

知识只不过是“潜在的”力量而已。知识只不过是“潜在的”力量而已。

1. Every seed is a potential plant. 1. Every seed is a potential plant.

每粒种子都可能长成植物。每粒种子都可能长成植物。

2. Knowledge is only potential power. 2. Knowledge is only potential power.

知识只不过是“潜在的”力量而已。知识只不过是“潜在的”力量而已。

essential adj. essential adj. 主要的主要的 , , 根本的根本的 ;; 本质的本质的 , , 实质的实质的 ; ; 必要的必要的


1. essential differences 1. essential differences

本质的区别本质的区别

2. essential English 2. essential English

基础英语基础英语

3. An essential bodily fluid. 3. An essential bodily fluid.

体液体内所必需的液体。体液体内所必需的液体。

4.Impartiality is essential to a judge. 4.Impartiality is essential to a judge.

公平是当法官所必需的。公平是当法官所必需的。

1. essential differences 1. essential differences

本质的区别本质的区别

2. essential English 2. essential English

基础英语基础英语

3. An essential bodily fluid. 3. An essential bodily fluid.

体液体内所必需的液体。体液体内所必需的液体。

4.Impartiality is essential to a judge. 4.Impartiality is essential to a judge.

公平是当法官所必需的。公平是当法官所必需的。

mechanism n. mechanism n. 机械机械 ,,装置；机制；组成部件装置；机制；组成部件


1.steering mechanism of motor vehicles 1.steering mechanism of motor vehicles

车辆转向装置车辆转向装置

2.a risk prevention mechanism 2.a risk prevention mechanism

风险防范机制风险防范机制

3.mechanism of price formation 3.mechanism of price formation

价格形成机制价格形成机制

1.steering mechanism of motor vehicles 1.steering mechanism of motor vehicles

车辆转向装置车辆转向装置

2.a risk prevention mechanism 2.a risk prevention mechanism

风险防范机制风险防范机制

3.mechanism of price formation 3.mechanism of price formation

价格形成机制价格形成机制

occurrence n. occurrence n. 发生，出现；事件，事故发生，出现；事件，事故


1.daily occurrences 1.daily occurrences

日常发生的事日常发生的事

2.Make allowance for unfavorable occurrences. 2.Make allowance for unfavorable occurrences.

留有余地。留有余地。

3.Graduation from university is an event in life. 3.Graduation from university is an event in life.

大学毕业是人生中的大事。大学毕业是人生中的大事。

1.daily occurrences 1.daily occurrences

日常发生的事日常发生的事

2.Make allowance for unfavorable occurrences. 2.Make allowance for unfavorable occurrences.

留有余地。留有余地。

3.Graduation from university is an event in life. 3.Graduation from university is an event in life.

大学毕业是人生中的大事。大学毕业是人生中的大事。

portfolios n. portfolios n. 组合组合


These unit trusts are investment portfolios managed by a These unit trusts are investment portfolios managed by a

professional fund manager. As the fund manager pools the professional fund manager. As the fund manager pools the

funds from many investors, he can invest in a diversified pfunds from many investors, he can invest in a diversified p

ortfolio that offers lower risk. ortfolio that offers lower risk.

负责管理基金的专业经理会集合许多投资者的资金，组成负责管理基金的专业经理会集合许多投资者的资金，组成一个风险分散的投资组合。一个风险分散的投资组合。

These unit trusts are investment portfolios managed by a These unit trusts are investment portfolios managed by a

professional fund manager. As the fund manager pools the professional fund manager. As the fund manager pools the

funds from many investors, he can invest in a diversified pfunds from many investors, he can invest in a diversified p

ortfolio that offers lower risk. ortfolio that offers lower risk.

负责管理基金的专业经理会集合许多投资者的资金，组成负责管理基金的专业经理会集合许多投资者的资金，组成一个风险分散的投资组合。一个风险分散的投资组合。

simultaneously adv.simultaneously adv. 同时发生同时发生 , , 一齐一齐 , , 同时同时 , , 同时同时存在存在


1. They almost touch the wall simultaneously. 1. They almost touch the wall simultaneously.

他们几乎是同时触壁的。他们几乎是同时触壁的。

2. I posted them simultaneously to different publishers. 2. I posted them simultaneously to different publishers.

我把它们同时寄给了不同的出版商。我把它们同时寄给了不同的出版商。

1. They almost touch the wall simultaneously. 1. They almost touch the wall simultaneously.

他们几乎是同时触壁的。他们几乎是同时触壁的。

2. I posted them simultaneously to different publishers. 2. I posted them simultaneously to different publishers.

我把它们同时寄给了不同的出版商。我把它们同时寄给了不同的出版商。

stability n.stability n. 稳定稳定 (( 性性 ), ), 稳度稳度 ; ; 坚定坚定 , , 恒恒心心


1.social stability 1.social stability

社会稳定社会稳定

2.Threatening Middle East stability 2.Threatening Middle East stability

威胁中东稳定威胁中东稳定

3.Success requires patience, stability and confidence.3.Success requires patience, stability and confidence.

成功需要耐心、恒心和信心。成功需要耐心、恒心和信心。

1.social stability 1.social stability

社会稳定社会稳定

2.Threatening Middle East stability 2.Threatening Middle East stability

威胁中东稳定威胁中东稳定

3.Success requires patience, stability and confidence.3.Success requires patience, stability and confidence.

成功需要耐心、恒心和信心。成功需要耐心、恒心和信心。

inadequate adj.inadequate adj. 不适当的不适当的 ; ; 不充足的不充足的 ; ; 缺乏的缺乏的


1.Dictionaries are useful but quite inadequate.

词典当然有用，但还是有不足的地方。

2.The supply is inadequate to meet the demand.

供不应求。

1.Dictionaries are useful but quite inadequate.

词典当然有用，但还是有不足的地方。

2.The supply is inadequate to meet the demand.

供不应求。

shortfall n.shortfall n. 不足不足 , , 差额差额 , , 赤字赤字


1. There will be a shortfall in wheat supplies this year. 1. There will be a shortfall in wheat supplies this year.

今年的小麦供应会有一定数量的短缺。今年的小麦供应会有一定数量的短缺。

2. We have to borrow money to cover the shortfall between e2. We have to borrow money to cover the shortfall between e

xpenditure and revenue. xpenditure and revenue.

我们不得不借钱以弥补收支间的差额。我们不得不借钱以弥补收支间的差额。

1. There will be a shortfall in wheat supplies this year. 1. There will be a shortfall in wheat supplies this year.

今年的小麦供应会有一定数量的短缺。今年的小麦供应会有一定数量的短缺。

2. We have to borrow money to cover the shortfall between e2. We have to borrow money to cover the shortfall between e

xpenditure and revenue. xpenditure and revenue.

我们不得不借钱以弥补收支间的差额。我们不得不借钱以弥补收支间的差额。

complexity n.complexity n. 复杂（性，度复杂（性，度 )) ，错综复杂，复合状态，错综复杂，复合状态


1.1.The complexity of the road map puzzled me. The complexity of the road map puzzled me.

错综复杂的公路图把我搞糊涂了。错综复杂的公路图把我搞糊涂了。

2.You should recognize the complexity of the problem. 2.You should recognize the complexity of the problem.

你应该认识到这个问题的复杂性。你应该认识到这个问题的复杂性。

1.1.The complexity of the road map puzzled me. The complexity of the road map puzzled me.

错综复杂的公路图把我搞糊涂了。错综复杂的公路图把我搞糊涂了。

2.You should recognize the complexity of the problem. 2.You should recognize the complexity of the problem.

你应该认识到这个问题的复杂性。你应该认识到这个问题的复杂性。

alternative n. alternative n. 两者择一两者择一 ; adj. ; adj. 两者择一的两者择一的 , , 供选择供选择的的


1.I have no alternative. 1.I have no alternative.

我没有别的选择。我没有别的选择。

2.That's the only alternative. 2.That's the only alternative.

那是唯一可行的方法。那是唯一可行的方法。

3.An alternative newspaper; alternative greeting cards. 3.An alternative newspaper; alternative greeting cards.

一份观点标新立异的报纸；内容新颖的贺卡一份观点标新立异的报纸；内容新颖的贺卡

1.I have no alternative. 1.I have no alternative.

我没有别的选择。我没有别的选择。

2.That's the only alternative. 2.That's the only alternative.

那是唯一可行的方法。那是唯一可行的方法。

3.An alternative newspaper; alternative greeting cards. 3.An alternative newspaper; alternative greeting cards.

一份观点标新立异的报纸；内容新颖的贺卡一份观点标新立异的报纸；内容新颖的贺卡


breakdown n. 崩溃 , 破坏 [损 ]; 故障；细目，分类 breakdown n. 崩溃 , 破坏 [损 ]; 故障；细目，分类

1.the breakdown of an empire

帝国的崩溃

2.Their car had a breakdown.

他们的汽车出了故障。

3.Please give me a breakdown of those income tax totals. 3.Please give me a breakdown of those income tax totals.

请给我一份所得税收的细目表。请给我一份所得税收的细目表。

1.the breakdown of an empire

帝国的崩溃

2.Their car had a breakdown.

他们的汽车出了故障。

3.Please give me a breakdown of those income tax totals. 3.Please give me a breakdown of those income tax totals.

请给我一份所得税收的细目表。请给我一份所得税收的细目表。


1. adverse wind 1. adverse wind

逆风逆风

2. adverse fortune 2. adverse fortune

恶运恶运

3. Is there any adverse reaction? 3. Is there any adverse reaction?

有任何副作用的反应吗？有任何副作用的反应吗？

1. adverse wind 1. adverse wind

逆风逆风

2. adverse fortune 2. adverse fortune

恶运恶运

3. Is there any adverse reaction? 3. Is there any adverse reaction?

有任何副作用的反应吗？有任何副作用的反应吗？

adverse n.方向相反的 , 敌对的 ; 不利的 , 有害的adverse n.方向相反的 , 敌对的 ; 不利的 , 有害的


1. 1. A new oversight body must be establishedA new oversight body must be established ，， reporting to the SEC.reporting to the SEC.

必须建立新的监督机构，向证卷交易委员会汇报。必须建立新的监督机构，向证卷交易委员会汇报。

2. He kindly winked at the oversight. 2. He kindly winked at the oversight.

他宽容地故意装着不知那个过失。他宽容地故意装着不知那个过失。

3. Your essay was not marked through an oversight on my part. 3. Your essay was not marked through an oversight on my part.

由于我的疏忽你的文章没有打分。由于我的疏忽你的文章没有打分。

1. 1. A new oversight body must be establishedA new oversight body must be established ，， reporting to the SEC.reporting to the SEC.

必须建立新的监督机构，向证卷交易委员会汇报。必须建立新的监督机构，向证卷交易委员会汇报。

2. He kindly winked at the oversight. 2. He kindly winked at the oversight.

他宽容地故意装着不知那个过失。他宽容地故意装着不知那个过失。

3. Your essay was not marked through an oversight on my part. 3. Your essay was not marked through an oversight on my part.

由于我的疏忽你的文章没有打分。由于我的疏忽你的文章没有打分。

oversight n.监督 , 监视 ; 看管 ; 疏忽 , 漏失 , 失察 , 失错oversight n.监督 , 监视 ; 看管 ; 疏忽 , 漏失 , 失察 , 失错


1. Is the equipment operational yet? 1. Is the equipment operational yet?

这套设备可投入运转了吗？这套设备可投入运转了吗？

2. The eight helicopters are fully operational. 2. The eight helicopters are fully operational.

这八架直升机都可以完全投入运行。这八架直升机都可以完全投入运行。

1. Is the equipment operational yet? 1. Is the equipment operational yet?

这套设备可投入运转了吗？这套设备可投入运转了吗？

2. The eight helicopters are fully operational. 2. The eight helicopters are fully operational.

这八架直升机都可以完全投入运行。这八架直升机都可以完全投入运行。

operational adj. adj. 操作的操作的 , , 运作的运作的 ;; 可以使用的可以使用的 , , 起作用起作用的的 operational adj. adj. 操作的操作的 , , 运作的运作的 ;; 可以使用的可以使用的 , , 起作用起作用的的


1. unexpected guests; unexpected news. 1. unexpected guests; unexpected news.

不速之客；意外的消息不速之客；意外的消息

3. The question was unexpected. 3. The question was unexpected.

问题出乎意料。问题出乎意料。

1. unexpected guests; unexpected news. 1. unexpected guests; unexpected news.

不速之客；意外的消息不速之客；意外的消息

3. The question was unexpected. 3. The question was unexpected.

问题出乎意料。问题出乎意料。

unexpected adj. adj. 料想不到的料想不到的 , , 突然的突然的 unexpected adj. adj. 料想不到的料想不到的 , , 突然的突然的

I. Study questions.I. Study questions.

1. What are the major risks banks may have to face? 1. What are the major risks banks may have to face?

2. From where the credit risk usually arise for a bank? 2. From where the credit risk usually arise for a bank?

3. Suppose you are a banker, now a borrower comes to 3. Suppose you are a banker, now a borrower comes to

apply for a 3-month loan to construct a new manufacturing apply for a 3-month loan to construct a new manufacturing

plant, will you approve his application? Why? plant, will you approve his application? Why?

4. What are the primary forms of interest rate risk banks 4. What are the primary forms of interest rate risk banks

may be exposed to? may be exposed to?

ExcisesExcises

1. Credit Risk, market risk, liquidity risk, interest rate 1. Credit Risk, market risk, liquidity risk, interest rate

risk , operational risk and so on. risk , operational risk and so on.

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2. A major risk that banks face is credit risk or the failure 2. A major risk that banks face is credit risk or the failure

of a counterparty to perform according to a contractual arof a counterparty to perform according to a contractual ar

rangement. This risk applies not only to loans but to other rangement. This risk applies not only to loans but to other

on- and off-balance sheet exposures such as guarantees, accon- and off-balance sheet exposures such as guarantees, acc

eptances and securities investments. Serious banking probleptances and securities investments. Serious banking probl

ems have arisen from the failure of banks to recognize impems have arisen from the failure of banks to recognize imp

aired assets, to create reserves for writing off these assets, aaired assets, to create reserves for writing off these assets, a

nd to suspend recognition of interest income when approprnd to suspend recognition of interest income when appropr

iate.iate.

ExcisesExcises

3. I don’t think I am going to approve his loan. In common s3. I don’t think I am going to approve his loan. In common s

ense, one can’t expect to finish constructing a new manufactense, one can’t expect to finish constructing a new manufact

uring plant in only 3-month. It is quite impractical. If I lend uring plant in only 3-month. It is quite impractical. If I lend

him money, I may have to face great credit risk as well as his him money, I may have to face great credit risk as well as his

inability to repay the money. inability to repay the money.

ExcisesExcises

4. The primary forms of interest rate risk to which banks a4. The primary forms of interest rate risk to which banks a

re typically exposed are: (1) repricing risk, which arises frore typically exposed are: (1) repricing risk, which arises fro

m timing differences in the maturity (for fixed rate) and rem timing differences in the maturity (for fixed rate) and re

pricing (for floating rate) of bank assets, liabilities and off-bpricing (for floating rate) of bank assets, liabilities and off-b

alance sheet positions; alance sheet positions;

ExcisesExcises

(2) yield curve risk, which arises from changes in the slo(2) yield curve risk, which arises from changes in the slo

pe and shape of the yield curve; (3) basis risk, which arises fpe and shape of the yield curve; (3) basis risk, which arises f

rom imperfect correlation in the adjustment of the rates earrom imperfect correlation in the adjustment of the rates ear

ned and paid on different instruments with otherwise similaned and paid on different instruments with otherwise simila

r repricing characteristics; and (4) optionality , which arises r repricing characteristics; and (4) optionality , which arises

from the express or implied options imbedded in many bank from the express or implied options imbedded in many bank

assets, liabilities and off-balance sheet portfolios.assets, liabilities and off-balance sheet portfolios.

ExcisesExcises

II. II. MatchingMatching ..

1. risk management a.1. risk management a. 恢复计划恢复计划2. continuous deterioration b.2. continuous deterioration b. 流动性风险管理流动性风险管理3. credit rationing c. 3. credit rationing c. 利率利率4. off-balance sheet exposure d.4. off-balance sheet exposure d. 数据库数据库5. resumption plan e. 5. resumption plan e. 金融机构金融机构6. financial institution f. 6. financial institution f. 风险管理风险管理7. internal control g. 7. internal control g. 表外业务表外业务8. interest rate h. 8. interest rate h. 持续恶化持续恶化9. liquidity management i. 9. liquidity management i. 信用配给信用配给10.data base j.10.data base j. 内部控制内部控制

ExcisesExcises

Check-upCheck-upCheck-upCheck-up

Answers:Answers:

1-5) f h i g a 6-10) e j c b d1-5) f h i g a 6-10) e j c b d

ExcisesExcises

III.III. Fill in the blanks according to what you have learned.Fill in the blanks according to what you have learned.

1. Risk management shortcomings need to be addressed not 1. Risk management shortcomings need to be addressed not only to improve the _________________ of individual instionly to improve the _________________ of individual institutions, but also to ________________ for the financial systutions, but also to ________________ for the financial system as a whole. tem as a whole.

2. To evaluate the credit risk, banks must first obtain certain 2. To evaluate the credit risk, banks must first obtain certain basic information, such as the integrity of the borrower, _basic information, such as the integrity of the borrower, ____________ and the his ______________, how much mon___________ and the his ______________, how much money is being sought, _________________, how long it is neeey is being sought, _________________, how long it is needed, and how it will be repaid, etc.ded, and how it will be repaid, etc.

ExcisesExcises


1. Risk management shortcomings need to be addressed not 1. Risk management shortcomings need to be addressed not

only to improve the only to improve the health and viabilityhealth and viability of individual insti of individual insti

tutions, but also to tutions, but also to maintain stabilitymaintain stability for the financial syst for the financial syst

em as a whole. em as a whole.

2. To evaluate the credit risk, banks must first obtain certain 2. To evaluate the credit risk, banks must first obtain certain

basic information, such as the integrity of the borrower, basic information, such as the integrity of the borrower, hh

is ability to repayis ability to repay and the his and the his financial positionfinancial position, how muc, how muc

h money is being sought, h money is being sought, the purpose of the loanthe purpose of the loan, how lon, how lon

g it is needed, and how it will be repaid, etc.g it is needed, and how it will be repaid, etc.

ExcisesExcises

3. The essentials that a bank’s management of a lending fun3. The essentials that a bank’s management of a lending fun

ction needs to adhere to are _________________, loan apction needs to adhere to are _________________, loan ap

proval and ____________________, and _____________. proval and ____________________, and _____________.

4. Liquidity risk arises from the __________ of a bank to ac4. Liquidity risk arises from the __________ of a bank to ac

commodate decreases in____________ or to __________commodate decreases in____________ or to __________

___.___.

ExcisesExcises


3. The essentials that a bank’s management of a lending 3. The essentials that a bank’s management of a lending

function needs to adhere to are function needs to adhere to are maintenance of prudent maintenance of prudent

written lending policieswritten lending policies, loan approval and , loan approval and

administration proceduresadministration procedures, and , and appropriate loan appropriate loan

documentationdocumentation. .

4. Liquidity risk arises from the 4. Liquidity risk arises from the inabilityinability of a bank to of a bank to

accommodate decreases inaccommodate decreases in liabilities liabilities or to or to fund increases fund increases

in assetsin assets..

ExcisesExcises

5. Interest rate risk refers to the exposure of a bank's financ5. Interest rate risk refers to the exposure of a bank's financ

ial condition to _______________ in ________________.ial condition to _______________ in ________________.

6. The most important types of operational risk involve6. The most important types of operational risk involve ______

_______________ and ________________._______________ and ________________.

ExcisesExcises


5. Interest rate risk refers to the exposure of a bank's 5. Interest rate risk refers to the exposure of a bank's

financial condition to financial condition to adverse movementsadverse movements in in interest interest

rates.rates.

6. The most important types of operational risk involve6. The most important types of operational risk involve

breakdowns in internal controlsbreakdowns in internal controls and and corporate corporate

governancegovernance..

ExcisesExcises

IV. Translation ( Answers) IV. Translation ( Answers)

1. It is driven home to investors that the higher the risk, the 1. It is driven home to investors that the higher the risk, the greater the return. greater the return.

2. The judgments made by the banks related to the creditw2. The judgments made by the banks related to the creditworthiness of borrowers do not always prove to be accurate. orthiness of borrowers do not always prove to be accurate. The creditworthiness of a borrower may decline over time dThe creditworthiness of a borrower may decline over time due to various factors. ue to various factors.

3. The small bank collapsed due to heavy losses on its fore3. The small bank collapsed due to heavy losses on its foreign exchange exposures.ign exchange exposures.

4. Interest rates are one of the most important variables in 4. Interest rates are one of the most important variables in the economy.the economy.

ExcisesExcises

5. The senior management of banks should work out policie5. The senior management of banks should work out policie

s for managing or mitigating operational risk.s for managing or mitigating operational risk.

6. Frequent supervisory examinations of banks are necessa6. Frequent supervisory examinations of banks are necessa

ry to keep them from taking on too much risk or committinry to keep them from taking on too much risk or committin

g fraud.g fraud.

7. 7. 建立并保持审慎的成文借贷政策、贷款审批和管理程建立并保持审慎的成文借贷政策、贷款审批和管理程序以及完善的贷款文档对于银行信贷管理是非常必要的。序以及完善的贷款文档对于银行信贷管理是非常必要的。

ExcisesExcises

8. 8. 在已知多样化的好处之后，你可能认为在资产组合里只在已知多样化的好处之后，你可能认为在资产组合里只要持有足够多样的证券，就可以完全清除风险。不幸的是，要持有足够多样的证券，就可以完全清除风险。不幸的是，由于证券具有无法通过多样化来消除的系统性风险，故这由于证券具有无法通过多样化来消除的系统性风险，故这一点不可能做到。也就是说，不管你的资产里有多少不同一点不可能做到。也就是说，不管你的资产里有多少不同的证券，仍有可能遇到难以摆脱的系统性风险。的证券，仍有可能遇到难以摆脱的系统性风险。

ExcisesExcises

V. Choose one best choice that is closest in meaning to the underlV. Choose one best choice that is closest in meaning to the underl

ined part in each sentence.ined part in each sentence. (Answers)(Answers)

1.1. A. affect A. affect B. employB. employ C. catch D. invent C. catch D. invent

2.2. A. rising A. rising B. fallingB. falling C. raising D balancing C. raising D balancing

3.3. A. dangerA. danger B. question C. cause D. anxiety B. question C. cause D. anxiety

4.4. A. Acceptable B. Reasonable A. Acceptable B. Reasonable C. OvermuchC. Overmuch D. Expressive D. Expressive

5.5. A. audible B. edible A. audible B. edible C. seeableC. seeable D. possible D. possible

ExcisesExcises

ExcisesExcises

6. 6. A. holdings B. debts C. reliabilities D. capital

7. 7. A. restorationA. restoration B. consumption C. assumption D. redeem B. consumption C. assumption D. redeem 8. A. disgusting B. uncontrollable C. competitive 8. A. disgusting B. uncontrollable C. competitive D. complicateD. complicatedd

9. A. retorted 9. A. retorted B. givenB. given C. transmitted D. permitted C. transmitted D. permitted

10. 10. A. fragileA. fragile B. resistible C. consumable D. uncompetitive B. resistible C. consumable D. uncompetitive

6. 6. A. holdings B. debts C. reliabilities D. capital

7. 7. A. restorationA. restoration B. consumption C. assumption D. redeem B. consumption C. assumption D. redeem 8. A. disgusting B. uncontrollable C. competitive 8. A. disgusting B. uncontrollable C. competitive D. complicateD. complicatedd

9. A. retorted 9. A. retorted B. givenB. given C. transmitted D. permitted C. transmitted D. permitted

10. 10. A. fragileA. fragile B. resistible C. consumable D. uncompetitive B. resistible C. consumable D. uncompetitive

AssignmentsAssignments

1.1. Review the Text .Review the Text .

2.2. Keep in mind the special teKeep in mind the special te

rms learned in this Unit.rms learned in this Unit.

3.3. Do exercises in the book.Do exercises in the book.

unit 6: bank risk management

Documents

background information

background information

student loan

loan department

loan chances

loan request

revision of unit

home loans