Risk capacity: Difference between revisions
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The maximum level of risk a financial firm can assume within the constraints of its regulatory capital and liquidity obligations, and its obligations to depositors, other customers, and shareholders. | The maximum level of risk a financial firm can assume within the constraints of its regulatory capital and liquidity obligations, and its obligations to depositors, other customers, and shareholders. | ||
The risk appetite is then set at a level within the maximum risk capacity, | The risk appetite is then set at a level within the maximum risk capacity, normally lower than the maximum capacity. | ||
Revision as of 14:36, 31 October 2016
1. Banking.
The maximum level of risk a financial firm can assume within the constraints of its regulatory capital and liquidity obligations, and its obligations to depositors, other customers, and shareholders.
The risk appetite is then set at a level within the maximum risk capacity, normally lower than the maximum capacity.
2.
In the non-financial sector, the term 'risk capacity' is sometimes used to mean very much the same as risk appetite.
