In what forms the credit risk arises for banks?

Credit risk may take the following forms: In the case of Direct Lending: Non-payment of principal / and or interest amount. In the case of Guarantees or Letters of Credit: Not meeting financial commitments by constituents on crystallization of these contingent liabilities. In the case of Treasury Operations: Default or cessation in payment or series of payments that have fallen due from the counter parties under respective contracts. In the case of Securities Trading Businesses: Non settlement of funds/securities. In the case of Cross-Border Exposure: Embargo or restrictions of free transfer of foreign currency funds imposed by foreign governments (Sovereigns).