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The health of the nation’s economy is closely related to the soundness of its banking system. A large body of academic research across many countries has demonstrated that a highly developed banking sector plays important role in facilitating economic growth. For example, financial and monetary markets play a vital role in directing existing funds in economy toward producing and industrial sectors to improve economic growth. In this regard, some economists believe that expanded financial markets are driving force of economic growth is countries.
A weak banking system could lead to major disaster for any financial system. This has became much more apparent during the financial crisis. During the 2008 subprime crisis, there are many example of the banking failure in the worldwide. Most of the common reason are that banks taken too much risk in order to get a higher return. Therefore, a proper evaluation on the risks which faced by the banks is needed. This chapter introduces the risk, types of risk faced by the banks and other factor that will have impact on the bank’s profitability. Problem statement, objectives, research questions, significance of the study and chapter layout will be included in this chapter as well.

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