Economic Impact of 'Risk Event'

Over lending - a phenomenon that is cyclical 

Conditions in the Bank 'lent over' akan booming at the time of experience 'under lend' at the time of recession because of the recessionary impact of the investment bank because the bank must make clear to the book bad debts, so that without the new capital in the banks ability to distribute credit will be reduced. This is called 'procyclicality' effect, which can be seen clearly in the phenomenon 'asset bubbles' → excessive borrowing during the boom conditions the expectations of income, and not realistic assessment of assets that are not realistic, as happened in the real estate and stock market, the world . 

Procyclicality is a matter that will be the focus of the research on management and credit risk models. Basel II has been criticized over the potential increase in 'procyclicality' from the credit because it is the result of the credit grading models of capital a bank needs. So memburuknya credit grading of the loan will cause the rising capital needs regardless of whether bad debts increased or not. 


Market and Liquidity Risk 

Market risk events increases as the impact of increased trade in the asset market, where trading assets is not without problems. Mathematical model used to identify and understand the risk has long been used, but there is still a short distance before the results of calculation to be reliable indicators of trends in market risk. 

Liquidity crisis may rarely occur in the retail banking, but often occur in the wholesale market. Wholesale banks do not collect the funds, menjaminkan assetnya (such as government bonds and corporate) to seek funds. If the asset is not liquid (ie the investor does not want to buy or buy with low prices), there will be a liquidity crisis. For the impact of liquidity crisis to be done: 
Increasing vigilance bank supervisors 
Quick reaction from the central bank, and 
Strict monitoring of management by the bank. 

Changes in market conditions is one of the things that cause the formation of Basel II Accord is more sensitive to the risk. 

Sarbanes-Oxley (SOX) 

Bank supervisory agencies often implement new regulations to minimize the problem recurred again. Introduction of these regulations can result in not directly to the customer, through the implementation of cost or change the value of the bank. 

For example is the introduction of Sarbanes-Oxley Act in the United States in 2002 that requires that corporate accountability diundangkannya. Regulations are introduced after the accounting scandals bangkrutnya company as a result of Enron and WorldCom. 


International Accounting Standards (IAS) 

IAS in the year 2005-2006 will be introduced, especially in the European Union. This may affect: 
How to book a number of bank hedging in the top of the underlying interest rate risk in their banking book. There are several possibilities are not allowed to Hedge accounting purposes, thereby affecting the level of benefits and volatilitas bank. 
Transparency (disclosure) in bank accounting and reporting system, which is required according to Basel II Pillar 3 Disclosure namely. It is not usual to consider a new accounting regulations as a risk event. However, when the introduction of IAS alter the perception of bank profits in the future, it clearly is a risk event. Therefore, it is necessary explanations to the stakeholders on the impact of disadvantage is.