What is the risk of concentration?
"The risk of concentration" is a term that is often used in banking and financial circles. The deadline concerns the relationship between the number of outstanding accounts operated by the bank and the number and type of debtors who received loans from the institution. Banks seek to use this type of financial risk to maintain a reasonable balance between hand deposits and the overall value that is currently subscribed.
together with the consideration of the total amount of the face provided in connection with the number of accounts operated by the bank, the risk of concentration also takes into account the nature of these loans. This involves identifying whether a significant percentage of loans is similar to the purpose of mortgages or car loans. Classification of loans and determination types, how much percentage, specific loan class in the overall calculation can help in determining the level of risk of concentration, the bank is the current one to wear in the economic sector.
ideal forWe will want to maintain the risk of concentration at a relatively low level. This is sometimes managed by making sure that more risky loans are only a certain percentage of total loans that are currently active. This creates a situation where the default settings of one of these more risky loans have less impact on the bank's ability to continue providing services to its customers, because losses with one type of loan are minimized by the continuing good performance of other types of loans. On the other hand, this means that the bank remains financially stable, carries a reasonable amount of financial risk and is not at risk of having to close branches or reduce the scope of services offered to its customers.
together with the understanding of loans and maintaining balance between these types, maintaining the total monetary value of the active borrowing in accordance with the Bank's assets are also very important if the institutions are to remain financially viable. For this reason, the number and type of registered loan in PR may beShift time on the basis of the total value of customer deposits in different types of customer accounts. If the bank loses clients and sees these deposits significantly reduce, it is likely that the institution will partially reduce the approval of new loan applications until the bank is able to increase the total deposits once again. If the bank continues to lose customers, the risk of concentration will increase, perhaps to the extent that the bank will fail as soon as it does not have assets at hand to adequately support the total amount of loans.