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Bank Risk Management

Definition ∞ Bank risk management involves identifying, assessing, and mitigating financial risks within banking operations. This discipline includes managing credit risk, market risk, operational risk, and liquidity risk to maintain financial stability. It ensures institutions can meet obligations and sustain profitability amidst economic shifts. Effective risk management is crucial for protecting depositors and preserving confidence in the financial system.
Context ∞ The increasing presence of digital assets introduces new dimensions to bank risk management, requiring adaptations for volatility, cybersecurity threats, and regulatory uncertainties associated with cryptocurrency holdings or blockchain transactions. Banks must develop robust frameworks to assess these novel risks as they consider participation in the digital asset economy. Regulatory bodies are actively working to establish guidelines for traditional financial institutions engaging with crypto, aiming to standardize risk assessment and capital requirements.

A translucent blue hardware wallet, featuring a smooth, rounded chassis, securely encapsulates cryptographic primitives. Two clear, tactile interface elements, potentially for multi-signature transaction confirmation or seed phrase recovery, protrude from its surface. A dark rectangular port, likely for USB connectivity or data transfer, is integrated into the side. This device symbolizes robust cold storage solutions for private keys, ensuring enhanced blockchain security and self-sovereign digital identity within the Web3 ecosystem, facilitating secure asset custody and tokenization.

→Systemic Risk

→Basel III Framework

→Operational Risk

Basel Committee Finalizes Global Bank Capital Standards for Crypto Assets

The 1,250% risk weight for Group 2 assets mandates a 1:1 capital-to-exposure ratio, structurally limiting bank participation in unbacked crypto markets.