Analyzing banking risk: a framework for assessing corporate governance and financial risk management

573 Pages·2000·3.45 MB·English

by  Hennie van Greuning

Analyzing Banking Risk : A Framework for
title: Assessing Corporate Governance and
Financial Risk Management
Greuning, Hennie van.; Brajovic
author:
Bratanovic, Sonja
publisher: World Bank
isbn10 | asin: 082134417X
print isbn13: 9780821344170
ebook isbn13: 9780585256108
language: English
Bank management, Risk management,
subject
Corporate governance.
publication date: 2000
lcc: HG1615.G746 2000eb
ddc: 332.1/068
Bank management, Risk management,
subject:
Corporate governance.
Page iii
Analyzing Banking Risk
A Framework for Assessing Corporate Governance and
Financial Risk Management
Hennie van Greuning
Sonja Brajovic Bratanovic
Page iv
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(c) 2000 The International Bank for Reconstruction and
Development/
THE WORLD BANK
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All rights reserved
Manufactured in the United States of America
First printing November 1999
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Cover design by Naylor Design.
ISBN 0-8213-4417-X
Library of Congress Cataloging-in-
Publication Data has been applied for.
Page v
Contents
Foreword xiii
Acknowledgments xv
1 1
Analyzing Banking Risk
1.1 1
Introduction: The Changing Bank Environment
1.2 3
Bank Exposure to Risk
1.3 4
Corporate Governance
1.4 7
Risk-Based Analysis of Banks
1.5 11
Analytical Tools Provided
2 15
A Context for the Risk-Based Review of Banks
2.1 15
Introduction: Why Banks Are Analyzed
2.2 17
Banks as Providers of Financial Information
2.3 18
A Framework for Financial Sector Development
2.4 24
A Holistic View of the Entire Financial System
2.5 27
Disclosure and Transparency of Bank Financial
Statements: A Prerequisite for Risk-Based Analysis
3 31
Key Players in the Corporate Governance and Risk
Management Process
3.1 31
Introduction: Financial Risk Management and the
Responsibilities of Key Players
Page vi
3.2 32
Regulatory Authorities: Establishing a Corporate
Governance and Risk Management Framework
3.3 34
Supervisory Authorities: Monitoring Risk Management
3.4 37
The Shareholders
3.5 40
The Board of Directors: Ultimate Responsibility for a
Bank's Affairs
3.6 45
Management: Responsibility for Bank Operations and
the Implementation of Risk Management Policies
3.7 50
The Audit Committee and Internal Auditors: An
Extension of the Board's Risk Management Function
3.8 52
External Auditors: A Reassessment of the Traditional
Approach to Auditing Banks
3.9 54
The Role of the General Public
4 59
Balance Sheet Structure and Management
4.1 59
Introduction: Composition of the Balance Sheet
4.2 62
Asset Structure: Growth and Changes
4.3 67
Liabilities Structure: Growth and Changes
4.4 71
Overall On-and-Off-Balance-Sheet Growth
4.5 76
Asset/Liability Management: Planned Changes in the
Balance Sheet Structure
4.6 78
Managing Risk Effectively
5 83
Profitability
5.1 83
Introduction: The Importance of Profitable Banks
5.2 85
Income Statement Composition
5.3 92
Income Structure and Profit Quality
5.4 98
Profitability Indicators
5.5 101
Profitability Ratio Analysis
6 105
Capital Adequacy
6.1 105
Introduction: The Characteristics and Functions of
Capital
6.2 108
Constituents of Capital
6.3 110
Bank Risk Profiles and Risk Weights