Explain in brief five risks associated with payment systems.
CS Professional · Banking - Law and Practice · PYQS · June 2017
Explain in brief five risks associated with payment systems.
Answer & Explanation:
The risks associated with the payment systems can broadly be classified under the following heads, viz., Credit Risk; Liquidity Risk; Operational Risk; Legal risk; and Systemic Risk. The circumstances under which these risks arise are as under: Risk Circumstances 1. Credit Risk Failure by a party to meet the financial obligations 2. Liquidity Risk A party in the system fails to pay on account of insufficient funds 3. Operational Risk A risk which can arise on account of human error, system failure, frauds, etc. 4. Legal Risk Non-compliance of legal or regulatory framework can create a legal risk 5. Systemic Risk It can have a chain effect into the system due to the default of one of the parties
Topics: Payment Systems
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