| Title : | Risk management practices in Nepalese commercial bank | | Material Type: | printed text | | Authors: | Srijana Timilsina, Author | | Publication Date: | 2016 | | Pagination: | 86p. | | Size: | GRP/Thesis | | Accompanying material: | 5/B | | General note: | Including bibilography | | Languages : | English | | Descriptors: | Banks
Banks and banking
Commercial banks
Risk management
| | Keywords: | 'risk management financial risk t, enterprise risk mananagement t, strategic risk management' | | Class number: | 332.106 | | Abstract: | During the last two decades the banking sector has experienced worldwide major transformations in its operating environment. Recently banking institutions are facing the environment that is changing rapidly and competition is increasing at local as well as international level. As a result the risk in banking sector is increasing day by day. So, banks need to analyze the risk and appropriate methods to mitigate the risks. The relationship between risk and many variables are studied extensively in different period of time. In regards to the relationship different results are found.Banks during the course of financial intermediation are confronted with various types of financial and non-financial risks.Banking is the business of risk (Al-Tamimi & Al-Mazrooei, 2007).Risks are uncertainties that could result in adverse variations of profitability or in losses (Bessis, 2011). Some risks cannot be eliminated or transferred due to the complexity and dynamism, so banks have to undertake the risks. In fact, banking business is the risky business so it dealt with risks and gets rewarded accordingly. The objective of financial institutions is to maximize profits and shareholder value by providing different financial services by managing risks (Ahmed et al., 2011).
Risk refers to possibility that the outcome of an action or event of bank, could bring up serious adverse impacts on bank’s profitability and performance resulting either a direct loss of earnings or capital. Therefore, the risk is interchangeably with uncertainty to refer the variability of returns associated with a given asset. The objective of financial institutions is to maximize profits and shareholder value by providing different financial services by managing risks. Risk management is aimed at protecting the organization, its people, assets and profits, against consequences and more particularly to reduce the severity and variability of losses. In another words risk management is the identification, analysis and economic control of those risks which threaten the asset or earning capacity of the organization.The main purpose of this study is to analyse the risk management practices of the Nepalese commercial banks with respect to the bank specific variables
The results in the prior studies on risk management practice are mixed and unclear. Hence, this study has been conducted to get clear idea of the risk management approaches of Nepalese commercial banks. For this, the sample of 16 commercial banks with data of 11 years from 2002/03 to 2012/13 has been taken. Data has been collected from various secondary sources like annual reports of sample banks and consolidated financial reports prepared by Nepal Rastra Bank. Descriptive statistics, portfolio analysis, correlation analysis, and regressions have been carried out to examine the secondary data.
The risk measures like credit risk (CR), liquidity risk (LR) and operational risk (OR) of the banks have been used as the dependent variable. Non -performing loan ratio, capital adequacy ratio, debt equity ratio, assets management and size have been considered as independent variables. Based on the results, capital adequacy ratio, non performing loan ratio, assets management, debt assets ratio and size in Nepal are important risk variable.
The recommendation put forward by this study is that banks are suggested to decrease the non performing loan to mitigate the credit risk and liquidity risk. On the other hand this study suggests that banks should maintain the capital adequacy ratio directed by NRB, because it reduce the risks avail in the future.
The major limitation of this study is that this study has excluded some bank macroeconomic variables that might have effect on risk of the commercial banks. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of risk management practices. |
Risk management practices in Nepalese commercial bank [printed text] / Srijana Timilsina, Author . - 2016 . - 86p. ; GRP/Thesis + 5/B. Including bibilography Languages : English | Descriptors: | Banks
Banks and banking
Commercial banks
Risk management
| | Keywords: | 'risk management financial risk t, enterprise risk mananagement t, strategic risk management' | | Class number: | 332.106 | | Abstract: | During the last two decades the banking sector has experienced worldwide major transformations in its operating environment. Recently banking institutions are facing the environment that is changing rapidly and competition is increasing at local as well as international level. As a result the risk in banking sector is increasing day by day. So, banks need to analyze the risk and appropriate methods to mitigate the risks. The relationship between risk and many variables are studied extensively in different period of time. In regards to the relationship different results are found.Banks during the course of financial intermediation are confronted with various types of financial and non-financial risks.Banking is the business of risk (Al-Tamimi & Al-Mazrooei, 2007).Risks are uncertainties that could result in adverse variations of profitability or in losses (Bessis, 2011). Some risks cannot be eliminated or transferred due to the complexity and dynamism, so banks have to undertake the risks. In fact, banking business is the risky business so it dealt with risks and gets rewarded accordingly. The objective of financial institutions is to maximize profits and shareholder value by providing different financial services by managing risks (Ahmed et al., 2011).
Risk refers to possibility that the outcome of an action or event of bank, could bring up serious adverse impacts on bank’s profitability and performance resulting either a direct loss of earnings or capital. Therefore, the risk is interchangeably with uncertainty to refer the variability of returns associated with a given asset. The objective of financial institutions is to maximize profits and shareholder value by providing different financial services by managing risks. Risk management is aimed at protecting the organization, its people, assets and profits, against consequences and more particularly to reduce the severity and variability of losses. In another words risk management is the identification, analysis and economic control of those risks which threaten the asset or earning capacity of the organization.The main purpose of this study is to analyse the risk management practices of the Nepalese commercial banks with respect to the bank specific variables
The results in the prior studies on risk management practice are mixed and unclear. Hence, this study has been conducted to get clear idea of the risk management approaches of Nepalese commercial banks. For this, the sample of 16 commercial banks with data of 11 years from 2002/03 to 2012/13 has been taken. Data has been collected from various secondary sources like annual reports of sample banks and consolidated financial reports prepared by Nepal Rastra Bank. Descriptive statistics, portfolio analysis, correlation analysis, and regressions have been carried out to examine the secondary data.
The risk measures like credit risk (CR), liquidity risk (LR) and operational risk (OR) of the banks have been used as the dependent variable. Non -performing loan ratio, capital adequacy ratio, debt equity ratio, assets management and size have been considered as independent variables. Based on the results, capital adequacy ratio, non performing loan ratio, assets management, debt assets ratio and size in Nepal are important risk variable.
The recommendation put forward by this study is that banks are suggested to decrease the non performing loan to mitigate the credit risk and liquidity risk. On the other hand this study suggests that banks should maintain the capital adequacy ratio directed by NRB, because it reduce the risks avail in the future.
The major limitation of this study is that this study has excluded some bank macroeconomic variables that might have effect on risk of the commercial banks. The study remains enough ground for future researcher in the same topic. The future studies can be carried out by selecting other financial institutions like development banks, public banks and finance companies to grab the wider view of risk management practices. |
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