You are a senior risk manager at a global investment bank. Your company has announced to...

 

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You are a senior risk manager at a global investment bank. Your company has announced to its shareholders a target share of a major market that is significantly higher than your current share of that market. One of your most important customers in this market has asked for a risk exposure limit that is 2.5x your normal risk exposure limit given this customer's financial position. The relationship officers assigned to the company have recommended that the increased limit be approved. In this request, they have the support of their senior managers, who add that approving the request from such an important customer will go a long way to reaching the company's market share target, and along with it, bigger bonuses for the bank's employees. In addition, the bank's earnings will likely be higher and the bank's price should rise, as well. They also note that the bank has previously gone beyond its normal limits for this customer, and has been rewarded with timely returns to normal limits, as well as with additional business. For its part, the customer has suggested that other banks are more than willing to give it what it wants if your bank does not. However, and as noted, the current request is for a much bigger extension beyond the normal risk limits than in the earlier cases. The earlier limit extensions did not reach your level because they were considerably smaller than the current request. You have the power to grant final approval or rejection to this request. What would you do, and why? In answering the "why" part, please discuss the positives and negatives of approving or rejecting the request, and what factors were most important in reaching your decision. You are a senior risk manager at a global investment bank. Your company has announced to its shareholders a target share of a major market that is significantly higher than your current share of that market. One of your most important customers in this market has asked for a risk exposure limit that is 2.5x your normal risk exposure limit given this customer's financial position. The relationship officers assigned to the company have recommended that the increased limit be approved. In this request, they have the support of their senior managers, who add that approving the request from such an important customer will go a long way to reaching the company's market share target, and along with it, bigger bonuses for the bank's employees. In addition, the bank's earnings will likely be higher and the bank's price should rise, as well. They also note that the bank has previously gone beyond its normal limits for this customer, and has been rewarded with timely returns to normal limits, as well as with additional business. For its part, the customer has suggested that other banks are more than willing to give it what it wants if your bank does not. However, and as noted, the current request is for a much bigger extension beyond the normal risk limits than in the earlier cases. The earlier limit extensions did not reach your level because they were considerably smaller than the current request. You have the power to grant final approval or rejection to this request. What would you do, and why? In answering the "why" part, please discuss the positives and negatives of approving or rejecting the request, and what factors were most important in reaching your decision.

Answer rating: 100% (QA)

The limit should be accepted because of the following positive reasons Its past experiences ... View the full answer