Context: One of the main functions of a bank is lending. Each time a bank advances money to a customer, be it an individual or an organisation, it creates credit risk. In reality, credit risk is only one of the many forms of risk a bank faces in its daily operations. Until recently, it could be asserted that, banking regulation was focused only on credit risk with limited emphasis on other forms of risk. Requirement: Identify and explain the nature and significance of the various forms of risk that banks face. In addition, consider and critically evaluate the view that regulators have focused only on credit risk. Draw conclusions as to how regulators might expand the regulations to take account of other forms of risk. Your conclusions should be based on the evidence you have reviewed through your considerations and evaluations. You should draw upon relevant theories and ideas and where appropriate use analysis, arguments and justification incorporating examples and illustrations. In answering this question, you should not only refer to material you have in Themes 3 and 4 in the study materials but you should also look at additional journal articles, trade association publications, and annual reports, thus demonstrating that you can conduct relevant and independent research. Key descriptors: Critically evaluate – here you must provide your verdict on the issues and draw conclusions as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. You must provide evidence from a number of sources which both agree and disagree with the argument you put forward. Your final conclusions must be based on clear identification, examination and evaluation of key factors, accompanied by evidence-based justification of your conclusions. your decision on what you think to be the important factors and then justifying how you have made your choice. Review – this involves you thoroughly looking into a subject. This should be a critical assessment and not just a descriptive review. Analyse – break an issue into constituent parts and fully discuss these parts.

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