1. Characterize the main risk exposure of the following

banking/FI transactions by choosing one of the following, and the rational behind your choice.

(Note: one or more of the 10 transactions listed below could have the same risk. Please do not answer in one or two words such as credit risk or systematic risk, etc. this is not enough, you need to explain why this risk is applicable).

1. Credit risk
2. Interest rate risk
3. Off balance sheet risk
4. Foreign exchange risk
5. Liquidity risk
6. Market risk
7. Sovereign risk
8. Operational risk
9. Compliance risk
10. Systematic Risk (Uncertainty)

1. A bank provides $1 million loan to a company with total annual debt service of 80%.

2. A banks balance sheet shows five large depositors accounting for more than 50% of total deposits.

3. An American bank buying a Lebanese bond denominated in US dollars.

4. An investment bank agrees to underwrite $50 million 10-year 8% bond issue, before selling it to investors in the following week.

5. A lawsuit against Arab bank in New York.

Systematic risk, since the probability

6. A Lebanese importer of oil from Saudi Arabia defaults on his

dollar letter of Credit issued to him by BLOM Bank.

7. A trader in the Treasury of a bank taking a large euro/dollar

foreign exchange position beyond the limits assigned to him

by senior management.

8. BankMed buys a 10-year bond issued by the Lebanese

government using one year certificate of deposit.

9. A sudden drop in LL exchange rate leading to losses in the banks trading portfolio in excess of VaR

10- A Lebanese bank not abiding by FATCA/Anti money

Laundering requirements.