As commercial banks move from their traditional banking activities of deposit taking and lending and shift more of their activities to trading,they are more subject to

Question

Quizplus · Accepted Answer

As commercial banks shift more of their activities to trading, they are more subject to market risk, which refers to the risk of losses arising from adverse movements in market prices of financial instruments such as stocks, bonds, and currencies. Credit risk refers to the risk of default by borrowers, political risk refers to the risk of losses arising from political events, and sovereign risk refers to the risk of losses arising from government actions or events in a particular country. While these risks may also affect banks engaged in trading activities, they are not specific to the shift away from traditional banking activities.

As Commercial Banks Move from Their Traditional Banking Activities of Deposit