Financial risk analysis of banks: a case study

Abstract

Risk Analysis have gained growing significance for banks and more so with the proposed Basel implementation in India by March 2008 by RBI. Our study would be to assess the riskiness of the Indian banks based on RBI guidelines for new capital adequacy and also using other methodologies. The objectives of this project are as follows- To determine the extent of three major risks, credit, operational and market risk in the financial portfolio of one of the largest banks in India, through different methods- Forecast the probable loss that might be incurred for the three major risks- Determine whether the capital allocation is adequate to meet these risks- Perform Scenario Analysis to evaluate the impact of sudden stress- Identify alternatives to churn the asset portfolio to ensure capital reserves adequacy for Basel 2 compliance