Financing cost

Written by Evispot. Posted in f, Glossary.

Financing cost or the cost of funds is a reference to the interest rate paid by financial institutions for the funds that they use in their business. The cost of funds is one of the most important input costs for a financial institution since a lower...

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Risk-Weighted Asset

Written by Evispot. Posted in Glossary, r.

Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other financial institutions in order to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of...

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Capital Cover Rate

Written by Evispot. Posted in c, Glossary.

Capital Cover Rate or Capital Adequacy Ratio (CAR) is a measurement of a bank’s available capital expressed as a percentage of a bank’s risk-weighted credit exposures. The capital adequacy ratio, also known as capital-to-risk weighted...

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Probability of Default (PD)

Written by Evispot. Posted in Glossary, p.

Probability of Default is the likelihood over a specified period, usually one year, that a borrower will not be able to make scheduled repayments. It can be applied to a variety of different risk management or credit analysis scenarios. Sometimes...

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Loss Given Default (LGD)

Written by Evispot. Posted in Glossary, l.

Loss given default (LGD) is the amount of money a bank or other financial institution loses when a borrower defaults on a loan, depicted as a percentage of total exposure at the time of default. A financial institution’s total LGD is calculated after...

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