Book description
The ultimate guide for bank management: how to survive and thrive throughout the business cycle
An essential guide for bankers and students of finance everywhere, The Principles of Banking reiterates that the primary requirement of banking—sound capital and liquidity risk management—had been forgotten in the years prior to the financial crash. Serving as a policy guide for market practitioners and regulators at all levels, the book explains the keys to success that bankers need to follow during good times in order to be prepared for the bad, providing in-depth guidance and technical analysis of exactly what constitutes good banking practice.
Accessible to professionals and students alike, The Principles of Banking covers issues of practical importance to bank practitioners, including asset-liability management, liquidity risk, internal transfer pricing, capital management, stress testing, and more. With an emphasis on viewing business cycles as patterns of stable and stressful market behavior, and rich with worked examples illustrating the key principles of bank asset-liability management, the book is an essential policy guide for today and tomorrow. It also offers readers access to an accompanying website holding policy templates and teaching aids.
Illustrates how unsound banking practices that were evident in previous bank crashes were repeated during the creation of the 2007-2008 financial market crisis
Provides a template that can be used to create a sound liquidity and asset-liability management framework at any bank
An essential resource for the international banking community as it seeks to re-establish its credibility, as well as for students of finance
Explains the original principles of banking, including sound lending policy and liquidity management, and why these need to be restated in order to avoid another bank crisis at the time of the next economic recession
Covers topics of particular importance to students and academia, many of which are marginally—if ever—addressed in current text books on finance
Offers readers access to a companion website featuring invaluable learning and teaching aids
Written by a banking practitioner with extensive professional and teaching experience in the field, The Principles of Banking explains exactly how to get back to basics in risk management in the banking community, essential if we are to maintain a sustainable banking industry.
Table of contents
- Cover
- Series Page
- Series1 Page
- Title Page
- Copyright
- Dedication
- Forewords
- Preface
- Acknowledgements
- About the Author
-
Part I: A Primer on Banking
-
Chapter 1: A primer on bank business and balance sheet risk
- An Introduction to Banking
- The Capital Markets
- Banking Business and capital
- Financial Statements and Ratios
- The Money Markets
- Bank Cash Flows and Other Basic Concepts
- Risk Exposures in Banking
- Drivers of Credit Risk
- Macro-Level Risk Management and Strategy
- Appendix 1.1 Summary Overview of Bank Product Line
- Definition of Banking
- Product Line
- References
- Chapter 2: Bank regulatory capital
-
Chapter 3: Banking and Credit Risk
- Credit Risk Principles
- Credit Risk
- Credit Ratings
- Ratings Changes Over Time
- Understanding Credit Risk
- External Rating Agency Credit Ratings
- Bank Internal Credit Ratings
- Credit Value-at-Risk
- Variance–Covariance Credit VaR
- Credit Limit Setting and Rationale
- Loan Origination Process Standards
- SVA and Credit Strategy
- Bibliography
-
Chapter 4: A Primer on Securitisation
- The Concept of Securitisation
- Market Participants
- Reasons for Undertaking Securitisation
- The Process of Securitisation
- Illustrating the Process of Securitisation: Airways No. 1 Limited
- Credit Rating Considerations
- Securitisation As In-House Deal to Create Collateral
- The Securitisation Market Post-2008
- Impact on Rating Agencies
- Securitisation Objectives in the Basel III Environment
- Secured Funding Value
- References
-
Chapter 5: The Yield Curve
- Importance of the Yield Curve
- Part I
- The Money Market Yield Curve
- Using the Yield Curve
- Types of Yield Curve
- Analysing and Interpreting the Yield Curve
- Further Views on the Yield Curve
- Part II
- A Further Look At Spot and Forward Rates
- Spot Rates and Forward Rates In Continuous Time
- The Determinants of the Swap Spread
- Part III
- Fitting the Yield Curve
- Yield-Curve Smoothing
- Implementing Curves in Practice
- Multi-Currency Yield Curves
- A Secured Funding Curve
- Appendices
- Appendix 5.1 Jensen's Inequality and the Shape of the Yield Curve
- Appendix 5.2 Testing the Unbiased Expectations Hypothesis
- Appendix 5.3 Linear Regression: Ordinary Least Squares
- Appendix 5.4 Illustration of Forward Rate Structure When The Spot Rate Structure Is Increasing
- Appendix 5.5 Regression Splines
- Appendix 5.6 Cubic Spline Interpolation
- Appendix 5.7: Summary of Collateral Classes
- References and bibliography
-
Chapter 1: A primer on bank business and balance sheet risk
-
Part II: Bank Asset and Liability Management
- Chapter 6: Asset–Liability Management I
-
Chapter 7: Asset–Liability Management II
- Introduction
- Basic Concepts
- Interest-rate Risk and Source
- The ALM Desk
- Liquidity and Interest-rate Risk
- Critique of the Traditional Approach
- The Cost of Funding
- Generic ALM Policy for Different Banks
- Securitisation
- Middle-Office Treasury Procedures and ALM Practice
- Appendix 7.1 NPV and Value-at-Risk (VaR)
- References and Bibliography
-
Chapter 8: Asset–Liability Management III: Trading and Hedging Principles
- Trading Approach
- Repo Market Specials Trading
- Interest-Rate Hedging Tools
- Interest-Rate Swap Hedging Applications
- Interest-Rate Risk Exposure and Option Hedging
- Hedging Using Bond Futures Contracts
- The Primary Hedge Measure: Bond Modified Duration and PV 01
- Hedging Credit Risk with Credit Derivatives
- References
- Chapter 9: Asset–Liability Management IV: The ALCO
- Chapter 10: The ALCO: Terms of Reference and Treasury Operating Model
- Chapter 11: Risk Reporting, Risk Policy and Stress Testing
-
Part III: Bank Liquidity Risk Management
-
Chapter 12: Principles of Bank Liquidity Management
- Bank Liquidity
- Sustainable Banking: Nine principles of Bank Liquidity Risk Management
- Liquidity Risk Management: The United Kingdom Regulator's View
- The Bank Liquidity Policy Statement
- Policy on Intra-group Lending
- The Liquid Asset Buffer
- Central Bank Facilities
- Liquidity Management and Collateral
- The Contingency Funding Plan
- References and Bibliography
- Chapter 13: Liquidity Risk Metrics
- Chapter 14: Liquidity Risk Reporting and Stress Testing
- Chapter 15: Internal Funds Pricing Policy
-
Chapter 12: Principles of Bank Liquidity Management
-
Part IV: Bank Strategy and Governance
- Chapter 16: Bank Strategy I: Formulating Strategy and Direction
-
Chapter 17: Bank Strategy II: Capital and Funding Management
- Textbook treatment of bank capital
- Capital Management Policy
- Capital Management, Systemic Risk and Macroprudential Strategy
- Benchmarking with the Market
- An integrated capital and liquidity management strategy
- Capital Management: Capital Instruments
- Capital Management Strategy
- The Basel Pillar III disclosure
- References and Bibliography
- Chapter 18: Principles of Corporate Governance
- Part V: Applications Software, Policy Templates and Teaching Aids
- Afterword
- List of Terms and Their Abbreviations
- Index
Product information
- Title: The Principles of Banking
- Author(s):
- Release date: May 2012
- Publisher(s): Wiley
- ISBN: 9780470825211
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