Abstract:

The purpose of this study is to identify the risk management practices of banking institution in Malaysia and also the impact of risk (volatility and VaR of the securities portfolio hold by banks) on risk indicator (RAROC). The result suggests that volatility has a significant relationship with RAROC whereas VaR is not a significant predictor of RAROC. Based on the review of RAROC and annual return of each banking institution, risk management behavior of commercial banks in Malaysia generally can be categorized into three categories: radical, moderate, and conservative.