ABC Bank’s regulators require that the bank use multiple risk mitigating approaches for the upcoming stress testing. Critically discuss the credit risk management approaches used by banks.

The assignment is a report requested by the senior management at ABC Bank. As ABC Bank’s risk trainee, you have been asked to prepare a report on the bank’s ability to meet the requirements of the Basel III Framework, which will be submitted to the bank’s senior risk analyst.

The cover page should contain a title, the total word count and an Executive Summary describing your key findings. (5 marks)

Provide a critical discussion on interest sensitive gap management when used as interest risk management tool in banks. Comment on its effectiveness and implication on leverage requirement.

ABC Bank’s regulators require that the bank use multiple risk mitigating approaches for the upcoming stress testing. Critically discuss the credit risk management approaches used by banks.