Okuzeka
Finance & Banking vocabulary · Risk Management

Concentration risk

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, concentration risk means: The risk of excessive exposure to one borrower, sector, region or other shared factor.

In Turkish: yoğunlaşma riski

How it is used

Name the common source of exposure; a large number of loans need not mean diversification.

Example sentences

  1. Many small hotel loans still created concentration risk in tourism.

    Separate borrowers can depend on the same economic driver.

  2. The bank reduced concentration risk by limiting exposure to its largest borrower.

    A single-name limit restricts dependence on one counterparty.

Common collocations

  • sector concentration risk
  • concentration risk limit
  • exposureThe amount of money a bank could lose to a particular borrower, sector, country or market if things go wrong.
  • credit riskThe risk that a borrower or another party will not pay back money it owes on time or in full, causing a loss for the lender.

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.