Systematic Financial Risks in Banking Systems and Strategies for Addressing Them
Banks play a crucial role in the functioning of any economy by providing essential financial services to individuals, businesses, and governments. However, banks are also exposed to various risks, including systematic financial risks. Systematic financial risks refer to risks that are inherent in the overall economic and financial system and affect all market participants. These risks are beyond the control of individual banks and can lead to widespread financial instability. Types of Systematic Financial Risks in Banking Systems Market Risk: Market risk is the risk of losses arising from changes in market prices such as exchange rates, interest rates, and stock prices. Market risk can be divided into two types: systematic and unsystematic risk. Systematic risk is the risk that affects the entire market or a large segment of it, whereas unsystematic risk affects individual assets or a specific sector. Examples of market risk include the global financial crisis...