Policies of Insuring Bank Operations Against Financial Crises

Table of Contents

1. 2. 2.1. 2.2. 2.3. 2.4. 2.5. 3. 3.1. 3.2. Introduction ......................................................................................................... 1 A brief historical overview ................................................................................. 3 The great depression ........................................................................................... 3 Scandinavian Banking Crisis .............................................................................. 4 Subprime Mortgage Crisis .................................................................................. 5 Irish Banking Crisis ............................................................................................ 5 Spanish Financial Crisis ...................................................................................... 6 Banking risks analysis......................................................................................... 8 Risk Classification .............................................................................................. 8 Risk Measurement ............................................................................................ 12 The Value-at-Risk (VAR) tool ............................................................. 12 The Risk Adjusted Return on Capital (RAROC) model ...................... 13 GAP Analysis ....................................................................................... 14

3.2.1. Measures of Market Risk .................................................................................. 12 3.2.1.1. 3.2.1.2. 3.2.2.1. 4. 4.1.

3.2.2. Measures of Interest Rate Risk ......................................................................... 14 3.2.3. Measures of Liquidity Risk ............................................................................... 15 Safety Nets and Bank Regulation ..................................................................... 17 Safety Nets...