DBFI402 BASEL AND RISK MANAGEMENT IN BANKING

Description

SESSION	Jan-Feb 2026
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	IV
course CODE & NAME	DBFI402 Basel Regulations and Risk Management in Banking

 

 

Assignment Set – 1

 

Q.1. Analyze the advantages of Asset Liability Management in terms of risk management and profitability of a Bank.

ALM Benefits

Asset Liability Management is a system for managing risks which arise due to mismatches between the maturity, repricing as well as cash flow characteristics of the bank’s assets and the liabilities. Utilized by banks in accordance with the Basel rules, ALM provides both defensive and offensive advantages. In terms of risk ALM protects banks from the effects of interest rate fluctuations and liquidity stress. On the profitability side it aids in the optimization of the balance sheet to maximize profits from

 

Its Half solved only

Buy Complete from our online store

 

https://smuassignment.in/online-store/

 

MUJ Fully solved assignment available for session Jan-Feb 2026.

 

Lowest price guarantee with quality.

Charges INR 198 only per assignment. For more information you can get via mail or Whats app also

Mail id is aapkieducation@gmail.com

 

Our website www.smuassignment.in

After mail, we will reply you instant or maximum

1 hour.

Otherwise you can also contact on our

whatsapp no 8791490301.

 

 

 

Q2. i) Explain Risk Weighted Assets for credit risk assessment as per Standardised Method prescribed by RBI.

1. ii) A bank holds the following assets on its balance sheet:

1. Cash and balances with the central bank: ₹ 5 million (Risk weight: 0%)
2. Government securities: ₹ 10 million (Risk weight: 0%)
3. Residential mortgages: ₹ 8 million (Risk weight: 50%)
4. Corporate loans (Rating AAA): ₹ 12 million (Risk weight: 20%)
5. Credit Card Lending: ₹ 5 Million (Risk Weight 50%)

Calculate the value of Risk Weighted Assets  and regulatory capital @9%

Ans 2.

1. i) the Risk Weighted Assets of the Standardised Approach

Under the Basel guidelines adopted by RBI it is the Standardised Approach for credit risk sets risk-related weights for the various categories of assets based upon their nature as a counterparty and their external credit rating. Risk Weighted Assets are calculated through multiplying each asset’s books value by a prescribed percent of risk and then summing the results. This method assures that banks holding riskier portfolios of assets are required to have more capital in their portfolios, whereas banks that hold safer assets such as Treasury securities

 

 

Q.3. i) Summarise Control framework for operational risk in banks. ii) Discuss key Internal Controls used by Banks for controlling operational risk.

Ans 3.

1. i) Control Framework for Operational Risk

Operational risk is defined in Basel II as the risk of loss resulting from inadequate or failed internal processes, individuals and systems or caused by external causes. The control framework for operational risk in banks follows a three-lines-of-defence model. The primary line of defense is the business unit and is the one who manages risks and is responsible for day-today management. Second line: the responsibility for risk management and compliance is responsible for setting rules and supervises. The third line is internal auditor, providing independent verification that the first two lines are

 

 

Assignment Set – 2

 

Q4. i) Outline core components of effective market risk management in a financial institution.

1. ii) Calculate Capital Charge for Market Risk using Standardized Measurement Method (SMM) as per following information about Rising Bank:

1.Interest Rate Risk      Exposure:₹300 Cr

General Risk Weight 1%

Specific Risk Weight: 2%

2.Equity Risk               Exposure:₹100 Cr

General Risk: 9% of the market value.

Specific Risk: 9% of the market value

3.FX Risk                    Open Position:₹120 Cr

Flat 15% capital charge on open positions

4.Commodity Risk       Exposure: ₹120 Cr

15% capital charge of exposure.     

Ans 4.

1. i) Essential Components of Market Risk Management

Market risk is the risk of financial losses due to changes of market prices, which include the price of equity, interest rates as well as foreign exchange rates and commodities prices. The effective management of risk within an financial institution is built upon five essential elements. First, there is risk recognition, which is the process of mapping every position at risk of price fluctuations across the trading and banking books. Finding out which desks or instruments are prone to

 

 

Q.5. ‘Securitization can lead to better liquidity management, more efficient capital allocation, and improved profitability.’ Justify.

Ans 5.

Concept of Securitization

Securitization refers to the process of changing assets that are not liquid like mortgages, loans, or receivables into securities which are then sold to investors. A bank bundles a pool of assets, transfers these assets to a special Purpose Vehicle, and the SPV issues securities backed by the cash flows out of these assets. The bank is paid cash at the beginning and investors are able to receive regular cash payments from the assets pool. This way, banks can create more loans than their

 

 

Q.6. Elaborate on liquidity ratio introduced to address short term liquidity risk in Banks under Basel III.

Ans 6.

Liquidity Coverage Ratio Under Basel III

The 2008 financial crisis exposed the vulnerability of banks in the face of sudden and extreme liquidity shocks. A number of banks that seemed to be solvent were insolvent within a matter of days when short-term funding markets froze. As a result, the Basel Committee on Banking Supervision introduced the Liquidity Coverage Ratio, which is an integral part of Basel III reforms. The RBI adopted the LCR structure to