Asset Depreciation Risk

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Asset Depreciation Risk

In insurance, the risk of loss to the company as the result of declining investments. An insurance company generally maintains a portfolio of securities. If a stock declines or a bond defaults, it may find itself with fewer assets and the same number of liabilities. In the United States, state governments determine the investments insurance companies are allowed to make to reduce asset depreciation risk. It is one of four types of risk to an insurance company; the others are interest rate risk, pricing inadequacy risk, and general business risk. Asset depreciation risk is also called asset quality risk. See also: Legal list.
References in periodicals archive ?
Finally, Moody's notes that although lower lending rates would lighten borrowers' repayment burdens, the benefits are unlikely to alleviate asset quality risks in the short term.
Kazakh banks' legacy and emerging asset quality risks are consistent with their low Viability Ratings, which reflect weak standalone credit profiles, mostly in the 'b' category.
The outlook on the kingdom reflects S&P's view of Bahrain's stable growth, well regulated financial system, and manageable asset quality risks amongst other factors.
We however caution that the Kenyan banking system has yet to fully witness the asset quality risks inherent in the aftermath of a consumer credit and real estate lending boom, with annual credit growth peaking at 35% in 2011.
While liquidity has improved and capital buffers are strong, these factors are moderated by legacy asset quality risks, primarily related to the ongoing restructuring of some large government-related borrowers.
We upgrade Korea on the basis of valuations, our belief that the asset quality risks are peaking in second quarter, some improvement in loan spreads and the rate hike of last week," said Sanjay Jain, an analyst at Credit Suisse.
While the merger will strengthen BMI's financial metrics -- given Al-Salam Bank's better capitalisation, and higher profitability and liquidity metrics - and complement BMI's brand recognition in Bahrain's commercial banking with the Islamic and investment banking experience of Al-Salam Bank, the rating agency also notes implementation and asset quality risks.
While Moody's recognises that the rapid growth is positive for Boubyan's franchise (4 per cent market share and 8th largest bank in Kuwait), this growth poses significant challenges in terms of both the bank's capacity to manage growth while maintaining a strong risk management framework and also as the unseasoned nature of the loan book generates asset quality risks.
The financial system appears relatively well regulated, with manageable asset quality risks.
In Fitch's view, Turkish banks are relatively well positioned to manage this growth without a marked build up in asset quality risks, given (i) the favourable economic backdrop; (ii) the currently moderate degree of leverage in the banking sector; (iii) the absence, to date, of notable property price inflation; (iv) the ban on foreign currency retail lending; (v) banks' generally sound credit risk management systems; and (vi) the regulator's focus on preventing excessive credit growth.
However, the ratings also reflect the loan portfolio's concentration in the construction sector and large borrowers and potential asset quality risks due to rapid loan growth.