Economic Shock,Systemic Risk,Risk Capital

Economic Shock & Systemic Risk

Although the diversification of the bank to loan portfolios, many banks are still very affected by economic risks in his country. Economy of a country is influenced by:
external shock, eg natural disasters, human caused disasters;
Economic management that incorrect (economic mismanagement)
Bank that is affected by economic conditions may have increased the number of customers in a significant traffic jams. Increasing the 'default rate' this could be caused by:
'Credit standing' companies affected by the declining economy in the country
Increasing the level of sharp penggangguran
Increasing interest rates
Steps to minimize the influence of economics, among others:
Follow the regulations (including Basel II) so that the bank will create economic scenario and ensure that banks have enough capital to protect the influence of stakeholders' economy shock '
Estimate the level of bad debts and the resulting bank to ensure that adequate capital.

Risk and Capital

Above example shows that the risk of a business, the greater the capital required to cover the level of risk faced by the so-called Capital Adequacy.
Risk Based Capital (RBC) is the level of capital that is based on the level of risk. RBC was due to the emergence of international banking market growth in the year 1970 - the 1980s was due to the increase in oil prices so that countries with a surplus at USD menginvestasikannya countries that deficit. This causes the growth of the banking sector is very fast, high-level competition, the emergence of syndicated loans to developing countries / multinational companies, etc..