Measuring effectiveness of risk management practices in banking sector

Abstract

The modern banking market is unimaginable without risk. Risks are present in every transaction, but they are of different sizes and can be "mitigated" and compensated for in a variety of ways. Finding a banking option that completely eliminates the risk and guarantees certain financial results in advance is very simple. For banks, an effective risk management has become an inevitable necessity for ensuring and maintaining financial stability in both national and international financial markets. While the risks that banks are exposed to in terms of their transactions diversify, it is a necessity to use advanced methods to monitor and measure these risks. Methods and approaches developed for risk-based public supervision in the banking sector should be able to respond to the risk diversification brought by today's globalization and liberalization in financial markets. For this reason, it is important that the risk-based supervision approaches to be implemented by the supervisory authorities are compatible with the international supervision standards as well as the characteristics of the banking sector of the country.