Risk Management in the Banking Sector: Case of TRNC

Abstract

Since 1980’s the concept of risk management entered into the agenda of financial markets and specifically after the introduction of Basel II Accord, has become the core basis in the banking sector. Financial liberalization, increased competition between financial institutions, the development of credit markets, the expansion of the credit derivatives market and the invention of new financial instruments, mainly complicated the management of credit risk for the banks and other integrated risks as a result of these developments. The first step in effective risk management process is to identify the risk exposures of the banks, to measure these risks and to develop methods to control and mitigate these risks. At this stage, Basel Accords and various regulations on risk management set forth by different supervisors are taken into account. In this study, the concept of risk management and its developmental stages until its current framework have been analysed and the implementation phase within TRNC has been examined.