Synopses & Reviews
"
The Principles of Banking is ideal reading for anyone planning or developing a career in banking. Professor Choudhry’s coverage is fully integrated, clear, and authoritative. There is no better practitioner's guide to this subject."
—Darrell Duffie
Dean Witter Distinguished Professor of Finance
Graduate School of Business, Stanford University
"The Principles of Banking is a timely reminder and update, incorporating lessons from the crisis and offering practical insights from that rare person – someone who combines working in the market with the dispassionate analysis of an academic. This book provides theory and practice in an easy-to-follow manner, an ideal reference for seasoned professionals."
—Irving Henry
Director, Prudential Capital and Risk
British Bankers' Association, London
"As a banker and bank regulator, asset and liability management has remained a high priority area for me. Professor Choudhry’s inclusive and incisive book on the nitty-gritty and nuances of this extremely important subject will help both practitioners and researchers better understand and analyse new tools and models for measuring and managing risk, as well as to keep up with the innovation challenges."
—Dr. K C Chakrabarty
Deputy Governor
Reserve Bank of India, Mumbai
"Professor Choudhry puts financial instruments and their derivatives within the context of banks’ asset and liability management, constituting a masterful and unique reference work in the field. This book covers bank liquidity risk analysis and management, as well as stress testing. On these topics Professor Choudhry's book is indispensable reading and is set to become the principal reference."
—Nuno Cassola e Barata
Adviser, Market Operations
European Central Bank, Frankfurt
"Not for beginners. A supreme, and superior, exposition of the banker's art. Every board member should have a copy of this book."
—Mohamoud Barre Dualeh
Manager, Islamic Liabilities and SME
The National Bank of Ras Al Khaimah, UAE
"Asset and Liability Management (ALM) and Liquidity are at the heart of every bank, and are key to a bank's survival and success. Professor Choudhry has a wealth of experience in this area. The Principles of Banking is an invaluable practical guide on how banks can lift their conduct to meet the challenges of the post-crisis era."
—Abhijit Patharkar
Senior Business Manager ALM
Standard Chartered Bank, Singapore
"The failure of the US banking system in 2007–2008 can be effectively described by failing to apply the principles and strategies discussed by Moorad Choudhry. Indeed, banks should understand the dynamic interaction of the economy, credit losses and interest rates, and utilize the strategies within to balance the extremes, and prioritize strategies based upon return of capital and return on capital."
—Joe Jennings CFA
Former Managing Director
Sterne Agee & Leach, Inc., Memphis, TN
"Moorad Choudhry's The Principles of Banking opens up a portal into the world of sophisticated, dynamic, capital markets-based commercial banking. He gives us the big picture, the precise details and a framework for analyzing the enormous risks facing these firms. The book is an invaluable resource."
—Jean Helwege
J. Henry Fellers Professor of Business Administration, Department of Finance, University of South Carolina
"This book is a "must read" for all senior bankers. There is no writer better than Moorad Choudhry for communicating the vital principles of liquidity, capital and asset-liability management and bank corporate governance."
—Professor Carol Alexander
Chair of Financial Risk Management, ICMA Centre, University of Reading
Chair of the Board, Professional Risk Manager’s International Association
"Moorad continues to make a substantial contribution both to academia and the finance profession.
His latest book, The Principles of Banking, is a comprehensive coverage of best-practice concepts and
his own recommended strategies which are set out in a very lucid manner. Moorad, who is a Visiting
Professor at CARISMA, makes us proud; well done Moorad!"
—Gautam Mitra
Professor of Computational Optimisation and Modelling & Emeritus Professor, Brunel University
Director of CARISMA: The Centre for the Analysis of Risk and Optimisation Modelling Applications
"Yet again, a work of excellence!"
—Rafael Hurtado
Vice-President Risk Management
Banco de Credito, Lima
"Professor Choudhry has been recommending for years what bank regulatory authorities only started writing about after the crash. The Principles of Banking is the last word on the subject, the definitive rulebook on bank governance and risk management for senior directors, board members and supervisors."
—Martin Barber
Global Head of ITO Delivery
Hewlett-Packard Corporation, EMEA
"A really comprehensive and approachable text – an invaluable companion for any financial market practitioner."
—Mark Miller
Global Economist
Lloyds TSB Corporate Markets, London
"A very highly rated book in the Group CFO performance management office! The office ALM bible, our main reference point on ALM matters."
—Vasilis Kosmas
Head of Structured Finance
National Bank of Greece, Athens
"Asset and liability management is without doubt a priority in banking; it is essential that proper controls are in place to ensure the best returns on, and also efficient use of, capital. This book covers all essential topics in a straightforward manner and builds, from basic to complex, a very useful tool for everyone in this environment."
—Tom O'Connor
Head of Treasury
KBC Bank NV, London
Review
"Moorad Choudhry’s 'The Principles of Banking' opens up a portal into the world of sophisticated, dynamic, capital markets-based commercial banking. He gives us the big picture, the precise details and a framework for analyzing the enormous risks facing these firms. The book is an invaluable resource." --
Jean Helwege, J. Henry Fellers Professor of Business Administration, Department of Finance, University of South Carolina"This book is a ‘‘must read’’ for all senior bankers. There is no writer better than Moorad Choudhry for communicating the vital principles of liquidity, capital and asset-liability management and bank corporate governance." -- Professor Carol Alexander, Chair of Financial Risk Management, ICMA Centre, University of Reading Chair of the Board, Professional Risk Manager’s International Association
"'The Principles of Banking' is ideal reading for anyone planning or developing a career in banking. Professor Choudhry’s coverage is fully integrated, clear, and authoritative. There is no better practitioner’s guide to this subject." -- Darrell Duffie, Dean Witter Distinguished Professor of Finance, Graduate School of Business, Stanford University
"The failure of the US banking system in 2007–2008 can be effectively described by failing to apply the principles and strategies discussed by Moorad Choudhry. Indeed, banks should understand the dynamic interaction of the economy, credit losses and interest rates, and utilize the strategies within to balance the extremes, and prioritize strategies based upon return of capital and return on capital." -- Joe Jennings CFA, Former Managing Director, Sterne Agee &Leach, Inc., Memphis, TN
"Asset and liability management (ALM) is at the heart of any bank. Among many of its functions, keeping the bank liquid and fixing the ‘‘value’’ of money (for the bank) are key to a bank’s survival and success. Moorad Choudhry has a wealth of experience in this area. The Principles of Banking is an invaluable practical guide on how banks can lift their conduct to meet the challenges of the post-crash era." -- Abhijit Patharkar, Senior Business Manager, Asset and Liability Management, Standard Chartered Bank, Singapore
"Moorad continues to make a substantial contribution both to academia and the finance profession. His latest book, The Principles of Banking, is a comprehensive coverage of best-practice concepts and his own recommended strategies which are set out in a very lucid manner. Moorad, who is a Visiting Professor at CARISMA, makes us proud; well done Moorad!" -- Gautam Mitra, Professor of Computational Optimisation and Modelling & Emeritus Professor, Brunel University; Director of CARISMA: The Centre for the Analysis of Risk and Optimisation Modelling Applications
"Yet again, a work of excellence." -- Rafael Hurtado, Vice-President Risk Management, Banco de Credito, Lima
"Professor Choudhry puts financial instruments and their derivatives within the context of banks’ asset and liability management, constituting a masterful and unique reference work in the field. This book covers bank liquidity risk analysis and management, as well as stress testing. On these topics Professor Choudhry’s book is indispensable reading and is set to become the principal reference." -- Nuno Cassola e Barata, Adviser, Market Operations, European Central Bank, Frankfurt
"The Principles of Banking is a timely reminder and update, incorporating lessons from the crisis and offering practical insights from that rare person – someone who combines working in the market with the dispassionate analysis of an academic. This book provides theory and practice in an easy-tofollow manner, an ideal reference for seasoned professionals." -- Irving Henry, Director, Prudential Capital and Risk, British Bankers’ Association, London
"As a banker and bank regulator, asset and liability management has remained a high priority area for me. Professor Choudhry’s inclusive and incisive book on the nitty-gritty and nuances of this extremely important subject will help both practitioners and researchers better understand and analyse new tools and models for measuring and managing risk, as well as to keep up with the innovation challenges." -- Dr. K C Chakrabarty, Deputy Governor, Reserve Bank of India, Mumbai
"Professor Choudhry has been recommending for years what bank regulatory authorities only started writing about after the crash. 'The Principles of Banking' is the last word on the subject, the definitive rulebook on bank governance and risk management for senior directors, board members and supervisors." -- Martin Barber, Global Head of ITO Delivery, Hewlett-Packard Corporation, EMEA
"A really comprehensive and approachable text – an invaluable companion for any financial market practitioner." -- Mark Miller, Global Economist, Lloyds TSB Corporate Markets, London
"A very highly rated book in the Group CFO performance management office! The office ALM bible, our main reference point on ALM matters." -- Vasilis Kosmas, Head of Structured Finance, National Bank of Greece, Athens
"Asset and liability management is without doubt a priority in banking; it is essential that proper controls are in place to ensure the best returns on, and also efficient use of, capital. This book covers all essential topics in a straightforward manner and builds, from basic to complex, a very useful tool for everyone in this environment." -- Tom O’Connor, Head of Treasury, KBC Bank NV, London
Review
This is an important book written with the authority and experience of many years of high-level management, at the cutting edge of Corporate Social Responsibility (CSR) in Indonesia and beyond. The case studies are excellent and mix examples from emerging and developed markets with insight and understanding. Above all they show cause for optimism amidst the challenges faced by local companies and MNEs in developing countries.
-- Geoffrey Williams, FRSA, FMIM
CEO, OWW Consulting
CSR Strategies is useful reading for decision makers within the public and private sector organizations. The book offers practical insights for business people as well as academics because the perspectives shared are the work of a seasoned practitioner who has been very successful in implementing the right CSR principles
-- Mas Achmad Daniri
Chairman, National Committee on Governance and
Chairman, Mirror Committee on Social Responsibility, ISO 26000, Indonesia
Impactful and sustainable CSR initiatives can only be obtained if corporations can translate their CSR concepts into corporate habits. CSR Strategies serves as an important, practical reference for corporations desiring to do so.
-- Risa Bhinekawati
Chairperson and Executive Director, Danamon Peduli Foundation
In the 70s, Sri Urip led the way in putting CSR into practice in Indonesia before the term was even used. She is now again leading in establishing a firm theoretical foundation for the relevance of CSR in today's business.
-- Elmar Bouma
Director, Indonesian Netherlands Association
CSR Strategies stands out among the crowd particularly because it was written based on the real-life experiences of the author-former CEO of Unilever Indonesia, who had developed a number of Unilever's brands into undisputable market leaders.
-- Chrysanti Hasibuan-Sedyono
Vice Chair, Board of Management, Indonesian Business Links
Unilever Indonesia's first female CEO demonstrates how perfect understanding of a developing market and tailored production, distribution, and marketing, applied with CSR principles, combine into a money-making exercise with only winners at the end. Employment and wealth created from this exercise will help improve wealth distribution and close the poverty gap. Fact- and case-based experiences condensed in this book are a must-read for those involved in legislative CSR procedures.
-- Rio Praaning Prawira Adiningrat
Managing Partner, PA Group
Synopsis
The 2007-2008-2009 financial market crisis has shown that the original principles of banking – sound liquidity risk management – have been forgotten during a prolonged bull market run. The ultimate result of this was bank failures such as Northern Rock, Lehmans and HBOS which had profound consequences for the world economy and created a global recession that may yet lead to long-term depression.
This book is an essential guide for bankers in every country of the world that reiterates the primary objective of banks and serves as a policy guide for all market practitioners. The original principles of banking such as sound lending policy and liquidity management need to be restated again and emphasized for bankers, regulators and investors.
The book investigates the part played by unsound banking practices in the creation of the 2007-2008 financial market crisis. It then lists a “policy guide” for all banks that bankers must observe through good times, which will enable them to survive the bad times. This is followed by in-depth technical analysis that bankers must observe as part of good business banking practice. And banks must recognize that business cycles are just that: cycles. Good times do not last forever and banks must be managed with discipline so that they survive the bad times. This book is a policy guide for the entire business cycle.
Synopsis
The ultimate guide for bank management: how to survive and thrive throughout the business cycleAn 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.
“engaging and interesting and, more importantly, easily understood, allowing a clear picture to emerge of how the principle or concept under discussion is to be applied in the real world.”
- Graeme Wolvaardt, Head of Market & Liquidity Risk Control, Europe Arab Bank Plc
Synopsis
Banks are a vital and indispensible part of the world's economy. It is imperative that they are managed on a sustainable basis, and in a way that assists global economic development. This book offers a comprehensive account of the essential principles of banking, aimed at senior bankers, regulators, board members and legislators.
Highlights of the book include:
- how to implement consistently successful asset-liability management (ALM) practice, the cornerstone of every bank business model;
- tools and methodology for business best-practice credit and liquidity risk management;
- recommended long-term capital strategy and corporate governance principles.
Adherence to the fundamental principles of banking must lie at the heart of all banking strategy. This means taking responsibility to protect depositor funds and ensure governance discipline.
Written by an experienced banker and finance academic, The Principles of Banking is essential reading for everyone involved in the banking industry.
Synopsis
Globalization has changed the nature of many markets. Previously protected local industries have been forced to become more competitive, a situation that provides both opportunities and challenges. Key among these is the challenge of implementing responsible business practices. Corporate social responsibility (CSR) is widely recognized as a worthy commitment to ensure sustainable benefit for both corporations and communities. CSR is also becoming an important base for businesses to build trust and confidence in their stakeholders, with the potential to provide a competitive edge.
To ensure sustainable growth opportunities, companies should pursue the three key dimensional values of creation:
Well defined and strategic CSR activities will ensure an optimum balance between social, environmental, and economic factors for sustainable profits. Hence, CSR has to be embedded within the business strategy to provide a competitive edge in the areas of brand equity, corporate reputation, employee retention, and environmental conservation.
Although the principles of CSR are essentially the same globally, each location still calls for different emphasis in the implementation process. Successful application of CSR principles is directly influenced by the business understanding of its business strategy in proportion to the needs of the local community.
As someone who has implemented all the above activities successfully, author Sri Urip is well placed to discuss effective CSR strategies to 21st century companies.
About the Author
Moorad Choudhry is Treasurer, Corporate Banking Division at The Royal Bank of Scotland. He was previously Head of Treasury at Europe Arab Bank, Head of Treasury at KBC Financial Products, and vice-president in structured finance services at JPMorgan Chase Bank. He is Visiting Professor at the Department of Mathematical Sciences, Brunel University and Visiting Teaching Fellow at the Department of Management, Birkbeck, University of London. He is a Fellow of the ifs-School of Finance and a Fellow of the Chartered Institute for Securities & Investment. He is also on the Editorial Board of the Journal of Structured Finance and the Editorial Advisory Board of American Securitization.
Table of Contents
Forewords xiii
Preface xvii
Acknowledgements xxiii
About the Author xxv
PART I A PRIMER ON BANKING 1
CHAPTER 1 A primer on bank business and balance sheet risk 3
CHAPTER 2 Bank regulatory capital 75
CHAPTER 3 Banking and credit risk 131
CHAPTER 4 A primer on securitisation 179
CHAPTER 5 The yield curve 221
PART II BANK ASSET AND LIABILITY MANAGEMENT 351
CHAPTER 6 Asset–liability management I 353
CHAPTER 7 Asset–liability management II 385
CHAPTER 8 Asset–liability management III: Trading and hedging principles 445
CHAPTER 9 Asset–liability management IV: The ALCO 493
CHAPTER 10 The ALCO: Terms of reference and treasury operating model 503
CHAPTER 11 Risk reporting, risk policy and stress testing 531
PART III BANK LIQUIDITY RISK MANAGEMENT 587
CHAPTER 12 Principles of bank liquidity management 589
CHAPTER 13 Liquidity risk metrics 653
CHAPTER 14 Liquidity risk reporting and stress testing 687
CHAPTER 15 Internal funds pricing policy 715
PART IV BANK STRATEGY AND GOVERNANCE 759
CHAPTER 16 Bank strategy I: Formulating strategy and direction 761
CHAPTER 17 Bank strategy II: Capital and funding management 801
CHAPTER 18 Principles of corporate governance 831
PART V APPLICATIONS SOFTWARE, POLICY TEMPLATES AND TEACHING AIDS 861
CHAPTER 19 Applications software, policy templates and spreadsheet models 863
Afterword 867
List of terms and their abbreviations 869
Index 875