Univ.-Prof. Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.In rating, the – previously planned, i.e. expected or – the actual default rates of the loans; if not expressed otherwise, calculated as the amount of the loss as a percentage of the exposures at the time of the counterparty default. Discrepancies between planned and incurred loss indicate poor calibration. – See default, default loss,… read more »
Operational risk event that results in a loss to the bank. According to the list in Basel II, which is more exemplary and therefore not comprehensive of all events, these are in particular – fraud from within, – fraud from outside, – employment practices and security, – customers, products and business working practices, – interruption… read more »
In the financial market, the contingency (eventuality: the actual possibility) of losing all or part of the capital invested in a commitment. – See hedging, call option, uncovered, non-investment grade, risk, loss absorbency, loss potential. – Cf. BaFin Annual Report 2006, p. 157 f. (capital management companies must determine the risk of loss per fund… read more »
The practice of even large companies, not only in the USA, to hide losses and debts at subsidiaries. The Sarbanes-Oxley Act of 2002 made this practice a criminal offense in the USA. Thanks to the vigilance of regulators, cases of loss hiding in banks and even in financial conglomerates in the EU have not come… read more »
The risk of incurring a loss in a transaction, and especially in an exposure to the financial market. – See investment courage, defaveur, profit potential, risk taker, loss, expected. Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec…. read more »
Amount of money of value in nonfinancial corporations determined according to certain rules of financial accounting. – See capital ratio. – Cf. Deutsche Bundesbank Monthly Report of June 2006, p. 20 (statement of capital formation and financing of German enterprises since 1991), p. 58 f. (reservations about the statistics; failure to take intersectoral credit relationships… read more »
Generally, a prior contractual agreement on the proportions in which losses arising from the default are to be shared among the various parties. – In particular, the agreement on how, in the event of the insolvency of a major debtor, the banks affected with non-performing loans are to cooperate and according to which formula the… read more »
A portfolio or pool contains securities to which third parties have rights (the risk that clear titles become comingled [= mixed] with assets owned legally by a third party). – This became apparent in many cases in the course of the financial crisis that followed the subprime crisis. When special-purpose entities and funds in financial… read more »
The hardly rationally explainable but empirically well-documented fact that both private investors and companies are inclined to let losses run their course instead of drawing a painful line under the commitment at an early stage. – See memory, money grave, money swallower, head-in-the-sand behavior, million grave, financial psychology, myopia, torpedo capital, loss, incurred, waste watcher…. read more »
In the event of a loss of twenty-five percent or more of liable capital, a bank in Germany must notify the supervisory authority without delay; see Sec. 24, Para. 1, № 5 KWG. Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr…. read more »