Why is a bank a risky organisation?

Answer 1

Because the only thing that a bank deals with is risk. If someone want to start a bank so he should have a large sums of money, because a percentage of that money owned will be reserved by the government in what is known as RRr (Required Reserve ratio), and that money cannot be used by the bank. The government keep it in case the bank get bankrupt. Also, the bank should keep additional reserves to pay for deposits in sever cases.

Moreover, banks get their money mainly from interests charged on loans. So, if the loans were not paid, or the borrowers went bankrupt they will lose the money. Recently banks were allowed to own a limited percentage of shares, yet shares are risky too. That is why when you want to take a loan the bank should be sure you will be able to pay back the money.

Answer 2

Any lending institution is a risky affair and any borrower is a risky proposition. There is always the chance of default in paying back the borrowed money. Once a bank cannot retrieve what it lends then after certain point they won't be able to lend any more or get income from the interest on such borrowings. If it continues the banks will foreclose. This is the risk involved in Banking. Of course modern banks are supervised by the Central Bank and has many protective mechanisms like reserve requirements, portfolio investment other than the basic bread and butter lending. Generally risk of default if not lend without adequate meassures to retrieve is very much high and banks are risky propositions.