Possible Risk for Commercial Banks

[Name of the Institute]

[Name of Student]

Possible Risk for Commercial Banks

Introduction

The industry of banking is considered to be a significant source for financing almost every business. The basic assumption that indicates the financial performance of the banks is based on the discussion and researches which have shown the increasing performance of the banks based on the financial indicators leads to improved activities and functions of the banks (Williams and Nguyen, 2005, p. 2119). The subject of financial research and performance has advanced with the management and finance fields. It has also been argued that there exist three principles of the factors that can improve the performance of the banking institutions, based on the size of the institution, management of the assets and the operational efficiency. There are still less studies that have been published on the effect that these factors may have on the performance of the banks, most importantly of the commercial banks (Ajala and Grewal, 2000, p. 168).

Discussion

Year 2008 has been a nightmare for the commercial banks and still now in 2012 they are facing the after affects of that financial crunch but the banking statistics shows that the Commercial banking sector is now recovering from huge financial crises but there are still a number of issues which seems to be a greater threat for the industry. The commercial banking industry has been the largest service sector in the whole world. The financial pundits and gurus proposed a number of changes in the structure of commercial banking so as to support the system from being collapsed.

Financial stability, liquidity problems, recovery of extended loans and legal requirements by central banks and Corporate Governance are some of the main issues which seem to be the bunch of problems and major hindrance to achieve the growth prospects.

Initiating from the Great Depression to the very recent Trauma of 2007, financers have seen it all and been through almost everything in terms of instability within the context of building, improving, hedging and stabilizing the market and the overall economic wheel of the commercial banks. The central waves of financial environment and the crisis situation has duly changed the overall situation and the commercial banks seem to be in danger even if they advance loan to a preferred customer or to a local one. The financial results of these banks have shown and highlighted that the banks are doing well and they are recovering from crises to i.e. they are back to the track of recovery but in real they had to face a bunch of issues every other day.

Frequently mergers and acquisition ion the banking sector has now become a common practice and this shows that they had to face a number of issues therefore they have decided to merge with other banks or sale their assets in order to avoid chapter 11 issues of bankruptcy. From English banks to Indian banks and from Asian to African financial industry all of them have tasted the market ...