Transfer risks (intermediary risks; translation risks)

In the case of loans by a bank to foreign currency areas, the possibility that – servicing (interest and repayment) in freely convertible currency is prohibited by political authorities or even – the debt is not recognized by a new government (odious public debt). – Risks arising in connection with credit derivatives, primarily at intermediary banks. These include, in particular, – underlying mismatch risk: two offsetting hedging transactions are not fully congruent, for example: they do not relate to similar reference assets, – counterparty risk: the protection seller is economically unable to perform as agreed, – legal risk: the assessment of a transaction as the occurrence of a credit event is disputed between the protection seller and the protection buyer, and – operational risk: the organizational (organizational: personnel, technical) infrastructure fails. – The possibility of a loss due to the fact that items valued in foreign currency are included in the balance sheet (possible loss from the conversion of foreign currency items on the balance sheet; these foreign exchange fluctuations are not offset by balance sheet items in the same currency). – Sometimes also said with regard to possible losses due to interruption of IT technology. i.e. for technology risks. – See information assurance, IT risks, country risk, risk, systemic sovereign debt, denied, securities, risk-free, technology risks, videoconference. – Cf. Deutsche Bundesbank Monthly Report, April 2004, p. 38.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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