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Risk

Credit risk

The risk that a borrower or counterparty fails to meet its obligations, causing a loss.

Credit risk is the oldest banking risk: the chance that a loan is not repaid or a counterparty defaults. It is measured through the probability of default, the loss given default and the exposure at default.

Banks manage it with underwriting standards, collateral, limits, diversification and provisions, and it drives a large part of regulatory capital through risk weighted assets.

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