Transaction risk is the risk to earnings or capital arising from problems with service or product delivery. This risk is afunction of internal controls, information systems, employee integrity, and operating processes. Transaction risk exists in ll products and services.
A bank’s success in credit card lending depends in part on achieving economies of scale. Credit card operations are highly automated, have a large transactional volume, and require strong operational controls. Aggressive growth has the potential to stretch operational capacity and can cause problems in handling customer accounts and in processing payments.
To control transaction risk, a bank should maintain effective internal controls and use comprehensive management information systems.Examiners assess transaction risk by evaluating the adequacy of credit card application and processing systems and controls. They consider the volume of accounts managed (on the books and securitized), the capabilities of systems and technologies in relation to current and prospective volume, contingency preparedness, and exposures through the payment system.
A bank’s success in credit card lending depends in part on achieving economies of scale. Credit card operations are highly automated, have a large transactional volume, and require strong operational controls. Aggressive growth has the potential to stretch operational capacity and can cause problems in handling customer accounts and in processing payments.
To control transaction risk, a bank should maintain effective internal controls and use comprehensive management information systems.Examiners assess transaction risk by evaluating the adequacy of credit card application and processing systems and controls. They consider the volume of accounts managed (on the books and securitized), the capabilities of systems and technologies in relation to current and prospective volume, contingency preparedness, and exposures through the payment system.
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