Bank risk types and trends in the Bank of America

Bankrisk types and trends in the Bank of America

Bankrisk types and trends in the Bank of America

TheBank of America is one of the American multinational financial andbanking services corporations that is headquartered in Charlotte inthe North Carolina. It is considered the second largest bankingholding company across the US by assets. The bank provides variousproducts and services, and this is through operating approximately16,300 ATMs, 5,100 banking centers, call centers and mobile and onlinebanking platforms. This plan will highlight the Bank of America’srisks types and trend. Strategic risks are those risks resulting fromthe adverse decision of the bank. Operational risk is that risk ofloss that results from the inadequate process, system, and people.The financial risks mean the extent in which the bank has theobligations that they must meet, and this is regardless of its cashflow. Compliance risk is that risk arising from the failures toadhere to procedures, laws and regulations (Scholes, 2000).

Arisk management planning is generally integrated with the financial,strategic and customer planning so that the responsibilities andgoals are all aligned within the bank organization. Risks are managedin a more systematic approach that focuses on the banking corporationas a whole in addition to managing risks across this enterprise andwithin the individual units of the business, transactions, theproducts and the services. There are various types of risks that theBank of America faces including, credit, liquidity, strategic,compliance, reputational and operational risks. The risk trendswithin the banking sector include the emerging risks from thecyber-security and the technological innovations. According toScholes (2000), the cyber-security risk is believed that it will moverapidly to the top of the banking company’s agenda. The key tool ofrisk management process that the bank uses to mitigate risks is theuse of risk and control self-assessment (RCSAs).Credit risk is thatrisk of default on a debt that often arises from a given borrowerfailing to make the required payments.

The bank on a regular basis employ the credit risk management processwith the aims of monitoring and assessing the credit portfolios,making certain estimates and in understanding the bank’s riskposition and all the value of the assets at a given time. Loaningpractices within the Bank of America entails offering consumer realestate services including consumer real estate products such as fixedand adjustable rate mortgage loan especially for home purchase andeven refinancing needs, home equity loan and home equity line ofcredits. The solvency ratios are designed in such a way that they aidin the measuring of the degree of the financial risks that the bankfaces. Business and the commercial groups that influence the bankinglegislation is aimed at avoiding the monetary fluctuations and toensure further solvency. The high capitalization within the Bank ofAmerica indicated the major concern for solvency and capitalization.

References

Scholes,M. S. (2000). Crisis and risk management. AmericanEconomic Review,17-21.