Okuzeka
Finance & Banking vocabulary · Risk Management

Risk appetite

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, risk appetite means: The amount and type of risk an organisation is willing to accept in pursuit of its goals, usually approved by the board and expressed as limits.

In Turkish: risk iştahı

How it is used

Used in risk management, strategy and market news. Banks write a risk appetite statement and framework with metrics such as capital ratios, NPL levels and concentration limits. In markets, investors' risk appetite rises or falls ('risk-on' and 'risk-off' moods), which moves currencies and bond yields.

Example sentences

  1. Lending to early-stage start-ups is outside the bank's risk appetite.

  2. Global risk appetite improved, and emerging market currencies gained.

Common collocations

  • risk appetite statement
  • risk appetite framework
  • within risk appetite
  • global risk appetite
  • risk assessmentThe process of identifying possible risks, estimating how likely they are and how much harm they could cause, and deciding how to manage them.
  • 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.
  • market riskThe risk of losses caused by changes in market prices, such as interest rates, exchange rates, share prices and commodity prices.
  • stress testAn analysis that checks whether a bank would have enough capital and liquidity to survive a severe but possible shock, such as a deep recession.
  • exposureThe amount of money a bank could lose to a particular borrower, sector, country or market if things go wrong.

More terms: Risk Management

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