The Principles of Banking

914 Pages·2012·6.89 MB·English

by  Moorad Choudhry

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Praise for
The Principles of Banking
MooradChoudhry’sThePrinciplesofBankingopensupaportalintotheworldofsophisticated,
dynamic,capitalmarkets-basedcommercialbanking.Hegivesusthebigpicture,theprecisedetails
andaframeworkforanalyzingtheenormousrisksfacingthesefirms.Thebookisaninvaluable
resource.
JeanHelwege
J.HenryFellersProfessorofBusinessAdministration,
DepartmentofFinance,UniversityofSouthCarolina
Thisbookisa‘‘mustread’’forallseniorbankers.ThereisnowriterbetterthanMooradChoudhry
forcommunicatingthevitalprinciplesofliquidity,capitalandasset-liabilitymanagementandbank
corporategovernance.
ProfessorCarolAlexander
ChairofFinancialRiskManagement,ICMACentre,UniversityofReading
ChairoftheBoard,ProfessionalRiskManager’sInternationalAssociation
The Principles of Banking is ideal reading for anyone planning or developing a career in
banking.ProfessorChoudhry’scoverageisfullyintegrated,clear,andauthoritative.Thereisno
betterpractitioner’sguidetothissubject.
DarrellDuffie
DeanWitterDistinguishedProfessorofFinance
GraduateSchoolofBusiness,StanfordUniversity
ThefailureoftheUSbankingsystemin2007–2008canbeeffectivelydescribedbyfailingtoapplythe
principles and strategies discussed by Moorad Choudhry. Indeed, banks should understand the
dynamicinteractionoftheeconomy,creditlossesandinterestrates,andutilizethestrategieswithin
tobalancetheextremes,andprioritizestrategiesbaseduponreturnofcapitalandreturnoncapital.
JoeJenningsCFA
FormerManagingDirector,
SterneAgee&Leach,Inc.,
Memphis,TN
Asset and liability management (ALM) is at the heart of any bank. Among many of its
functions,keepingthebankliquidandfixingthe‘‘value’’ofmoney(forthebank)arekeytoabank’s
survivalandsuccess.MooradChoudhryhasawealthofexperienceinthisarea.ThePrinciplesof
Bankingisaninvaluablepracticalguideonhowbankscanlifttheirconducttomeetthechallenges
ofthepost-crashera.
AbhijitPatharkar
SeniorBusinessManager,
AssetandLiabilityManagement,
StandardCharteredBank,Singapore
Mooradcontinuestomakeasubstantialcontributionbothtoacademiaandthefinanceprofession.
Hislatestbook,ThePrinciplesofBanking,isacomprehensivecoverageofbest-practiceconceptsand
hisownrecommendedstrategieswhicharesetoutinaverylucidmanner.Moorad,whoisaVisiting
ProfessoratCARISMA,makesusproud;welldoneMoorad!
GautamMitra
ProfessorofComputationalOptimisationandModelling&
EmeritusProfessor,BrunelUniversity
DirectorofCARISMA:TheCentrefortheAnalysisofRiskand
OptimisationModellingApplications
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Yetagain,aworkofexcellence.
RafaelHurtado
Vice-PresidentRiskManagement,
BancodeCredito,Lima
ProfessorChoudhryputsfinancialinstrumentsandtheirderivativeswithinthecontextofbanks’asset
and liability management, constituting a masterful and unique reference work in the field. This
bookcoversbankliquidityriskanalysisandmanagement,aswellasstresstesting.Onthesetopics
ProfessorChoudhry’sbookisindispensablereadingandissettobecometheprincipalreference.
NunoCassolaeBarata
Adviser,MarketOperations,EuropeanCentralBank,Frankfurt
ThePrinciplesofBankingisatimelyreminderandupdate,incorporatinglessonsfromthecrisisand
offeringpracticalinsightsfromthatrareperson–someonewhocombinesworkinginthemarket
withthedispassionateanalysisofanacademic.Thisbookprovidestheoryandpracticeinaneasy-to-
followmanner,anidealreferenceforseasonedprofessionals.
IrvingHenry
Director,PrudentialCapitalandRisk,
BritishBankers’Association,London
Asabankerandbankregulator,assetandliabilitymanagementhasremainedahighpriorityareafor
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
analysenewtoolsandmodelsformeasuringandmanagingrisk,aswellastokeepupwiththe
innovationchallenges.
Dr.KCChakrabarty
DeputyGovernor,ReserveBankofIndia,Mumbai
ProfessorChoudhryhasbeenrecommendingforyearswhatbankregulatoryauthoritiesonlystarted
writingaboutafterthecrash.ThePrinciplesofBankingisthelastwordonthesubject,thedefinitive
rulebook on bank governance and risk management for senior directors, board members and
supervisors.
MartinBarber
GlobalHeadofITODelivery,
Hewlett-PackardCorporation,EMEA
Areallycomprehensiveandapproachabletext–aninvaluablecompanionforanyfinancialmarket
practitioner.
MarkMiller
GlobalEconomist,LloydsTSBCorporateMarkets,London
AveryhighlyratedbookintheGroupCFOperformancemanagementoffice!TheofficeALMbible,
ourmainreferencepointonALMmatters.
VasilisKosmas
HeadofStructuredFinance,
NationalBankofGreece,Athens
Assetandliabilitymanagementiswithoutdoubtapriorityinbanking;itisessentialthatproper
controlsareinplacetoensurethebestreturnson,andalsoefficientuseof,capital.Thisbookcovers
allessentialtopicsinastraightforwardmannerandbuilds,frombasictocomplex,averyusefultool
foreveryoneinthisenvironment.
TomO’Connor
HeadofTreasury,KBCBankNV,London
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The Principles
of Banking
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DictumMeumPactum
—The motto of the London Stock Exchange
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The Principles
of Banking
MOORAD CHOUDHRY
John Wiley & Sons Singapore Pte. Ltd.
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Copyright#2012MooradChoudhry
Publishedin2012byJohnWiley&SonsSingaporePte.Ltd.
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Thispublicationisdesignedtoprovideaccurateandauthoritativeinformationinregardtothe
subjectmattercovered.Itissoldwiththeunderstandingthatthepublisherisnotengagedin
renderingprofessionalservices.Ifprofessionaladviceorotherexpertassistanceisrequired,the
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Theviewsexpressedinthisbookareanexpressionoftheauthor’spersonalviewsonlyanddo
notnecessarilyreflecttheviewsorpoliciesofTheRoyalBankofScotlandGroupplc,its
subsidiariesoraffiliatedcompanies,oritsBoardofDirectors.RBSdoesnotguaranteethe
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Whileeveryattempthasbeenmadetoensureaccuracy,neithertheauthornorthepublisherwill
acceptanyliabilityforanyerrorsoromissionsherein.Thisbookdoesnotconstituteinvestment
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asarecommendationtodealinanyfinancialmarketorinstrument,andtheauthor,publisher,
employer,anynamedentity,affiliatedbodyoracademicinstitutionwillnotacceptliabilityfor
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whichappearsontheWileywebsite(seeChapter19fordetails).
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ISBN978–0–470–82521–1(Hardback)
ISBN978–0–470–82701–7(ePDF)
ISBN978–0–470–82700–0(Mobi)
ISBN978–0–470–82702–4(ePub)
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Formywife,
Mrs.LindsayChoudhry
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