Risk Management Cw1

4058 Words Apr 29th, 2014 17 Pages
RISK MANAGEMENT AND INTERNATIONAL INVESTMENT REPORT OF MARYLEBONE BANK
BFBL606.2 Risk Management and International Finance
Tho Cam Vu
Student ID: 13486903
Date: 30th May 2014
Word Count: 3,413
Student ID: 13486903
Date: 30th May 2014
Word Count: 3,413

ABSTRACT

Marylebone Bank is an UK-based bank and had certain investments within the country and international. Marylebone Bank is currently holdings investments in five FTSE companies in banking industry, also holdings certain assets of cash and equity. The report sets the bank’s capital requirement with the requirement of Basel Accords in order to build up sustainable positive capital frequently to avoid losses, liabilities and liquidity. Firstly, the report analyzes the risk
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Operational Risk 12 IV. The Capital Requirement under different Basel Accords 12 6. Under Basel 1(1988 BIS Accord) 13 7. Under Basel 1(1996 Amendment) 13 8. Under Basel 2 14 9. Under Basel 2.5 15 10. Under Basel 3 15 V. Conclusion 17 VI. References 18

I. INTRODUCTION
As a risk manager of Marylebone Bank, the primary aim is making sure the bank’s capital achieve an appropriate level to meet the obligations, be able to pay off the risk-taking and bear the expense of unexpected losses. The Basel accord is applied as a guideline to maintain the risk rate to minimum, avoiding financial clashes. The report examines variety of methods in order to estimate three key risk capital charges in financial institutional management, which are market risk, credit risk and operational risk.

II. MARKET RISK CAPITAL CHARGE ESTIMATION
There are five companies have been chosen, all of them are in the banking industry and members of FTSE100. They are Barclays, HSBC, Lloyds Banking, The Royal Bank of Scotland and Standard Chartered. All the historical adjusted close is collected from Yahoo! Finance. 1. Variance – Covariance Method
The first method to be applied is Variance-Covariance method as to calculate the returns of each company in 500 financial days, in order to calculate the covariance between the returns of two companies respectively. Combines with the value of assets, which are

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