Legal risk in a bank can lead to which of the

Solution

The legal risks primarily arise either due to lack of clarity of the documentation of the product or the act of the counterparty. Change in legal environment due to legislative changes and Court interpretations/proceedings also result in legal risk. Legal risk includes risk of non-enforceability of contract or in-correct documentation resulting in the increased probability of loss. Broadly, legal risks may result in (i)      claims against institution, (ii)     fines, penalties, punitive damages, (iii)    unenforceable contracts resulting from defective documentation, and (iv)   loss of institutional reputation