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Author van Greuning, Hennie
Title Analyzing Banking Risk : A Framework for Assessing Corporate Governance and Financial Risk
Imprint Herndon : World Bank Publications, 2009
©2009
book jacket
Edition 3rd ed
Descript 1 online resource (418 pages)
text txt rdacontent
computer c rdamedia
online resource cr rdacarrier
Note Cover -- Title Page -- Contents -- Foreword to the Third Edition -- Acknowledgments -- 1 Overview of Banking Risks -- Key Messages -- 1.1 Introduction: The Changing Bank Environment -- 1.2 Bank Exposure to Risk -- 1.3 Corporate Governance -- 1.4 Risk-Based Analysis of Banks -- 1.5 Analytical Tools Provided -- Questionnaire to facilitate the risk-based analysis of banks -- Data input tables -- Graphs -- 2 A Framework for Risk Analysis -- Key Messages -- 2.1 Financial Management -- 2.2 Why Banks Are Analyzed -- 2.3 Understanding the Environment in Which Banks Operate -- Financial System Infrastructure -- 2.4 The Importance of Quality Data -- 2.5 Risk-Based Analysis of Banks -- Computation Versus Analysis: The Importance of Integrated Financial Analysis -- 2.6 Analytical Tools -- Questionnaires and Data-Input Tables -- Automated Processing of Data -- Ratios -- Graphs and Charts -- 2.7 Analytical Techniques -- Ratio Analysis -- Common-Size Analysis -- Structure of the Balance Sheet -- Analysis of the Income Statement -- Cross-Sectional Analysis -- Trend Analysis -- Variations of Trend Analysis -- Annual Growth (Year-to-Year) -- Cumulative Growth from a Base Year -- Regression Analysis -- 3 Corporate Governance -- Key Messages -- 3.1 Corporate Governance Principles -- 3.2 Major Developments in Corporate Governance Principles -- 3.3 Regulatory Authorities: Establishing a Risk-Based Framework -- 3.4 Supervisory Authorities: Monitoring Risk Management -- 3.5 The Shareholders: Appointing the Right Policy Makers -- Assessing the Role of Shareholders -- 3.6 The Board of Directors: Ultimate Responsibility for a Bank's Affairs -- 3.7 Management: Responsibility for Bank Operations and the Implementation of Risk Management Policies -- Management Information Availability to the Board of Directors -- Risk Analysis: Assessment of Management
3.8 The Audit Committee and Internal Auditors: An Extension of the Board's Risk Management Function -- Audit Committee and Internal Audit Responsibilities -- 3.9 External Auditors: A Reassessment of the Traditional Approach of Auditing Banks -- 3.10 The Role of the General Public -- Annex 3A: National Initiatives to Improve Corporate Governance -- OECD Principles of Corporate Governance -- Committee of Sponsoring Organizations of the Treadway Commission, United States (COSO) -- Integrated Framework for Internal Control of Financial Reporting -- Risk Management Framework -- Other Initiatives -- 4 Balance Sheet Structure -- Key Messages -- 4.1 Introduction: Composition of the Balance Sheet -- 4.2 Bank Assets -- Cash and Balances with the Central Bank -- Financial Assets Held for Trading -- Loans and Advances to Customers -- Tangible Assets -- Investments in Associates, Subsidiaries, and Joint Ventures -- Other Assets -- 4.3 Bank Liabilities -- Central Bank Funding -- Financial Liabilities Held for Trading: Repurchase Agreement Obligations -- Financial Liabilities Measured at Amortized Cost -- Deposits from Banks and Other Credit Institutions -- Deposits from Customers -- Foreign Borrowings -- 4.4 Equity and Other Items -- Off-Balance-Sheet Items -- 4.5 Growth and Changes in the Balance Sheet -- 4.6 Risk Analysis of the Balance Sheet Structure and Growth -- Mismatches -- Growth Trends -- Low-Earning and Nonearning Assets -- Off-Balance-Sheet Growth -- 5 Income Statement Structure -- Key Messages -- 5.1 Profitability -- 5.2 Income Statement Composition -- Interest Income -- Interest Expense -- Net Interest Income -- Gains (Losses) on Financial Assets and Liabilities Held for Trading -- Other Operating Income -- Exchange Differences -- Administrative Costs -- Depreciation -- Provisions -- Impairment Losses
Share of the Profit or Loss of Associates Accounted for Using the Equity Method -- 5.3 Analyzing the Sources of Banking Income -- 5.4 Analyzing Quality of Earnings -- 5.5 Analysis of Profitability Indicators and Ratios -- 5.6 Assessing Internal Performance -- 6 Capital Adequacy -- Key Messages -- 6.1 Introduction: The Characteristics and Functions of Capital -- 6.2 Capital Adequacy Standards and the Basel Accords -- 6.3 Constituents of Capital and Minimum Capital Requirements -- Tier 1 Capital -- Tier 2 Capital -- Tier 3 Capital -- Minimum Capital Requirements -- 6.4 Risk-Based Regulatory Capital Allocation: Pillar 1 -- Credit Risk -- The Standardized Approach -- Internal Ratings-Based (IRB) Approaches -- Market Risk -- Standardized Framework -- Internal Model Approach: The Use of Value-at-Risk (VAR) -- Operational Risk -- Basic Indicator Approach -- Standardized Approach -- Advanced Management Approaches (AMAs) -- 6.5 Supervisory Review: Pillar 2 -- 6.6 Market Discipline: Pillar 3 -- 6.7 Management of Capital Adequacy -- 6.8 Analysis of a Bank's Capital Adequacy -- Analysis of the Structure of a Bank's Capital -- Analysis of a Bank's Risk Profile -- Evaluation of a Bank's Current and Future Capital Needs -- Annex 6A: Credit Risk-Related Weight Assignments Under the Basel I Accord, Covered by Tier 1 and Tier 2 Capital -- Credit Risk Related to On-Balance-Sheet Items -- Credit Risk Related to Off-Balance-Sheet Items -- Credit Risk Related to Derivative Instruments -- Annex 6B: Calculation of the Capital Adequacy Ratio to Include Market Risk (Tier 3 Capital) -- Background -- Example: Calculation of the Capital Adequacy Ratio to Include Market Risk (Tier 3 Capital) -- Solution-see table 6B.1 -- Notes -- 7 Credit Risk Management -- Key Messages -- 7.1 Establishing Policies for Managing Credit Risk -- 7.2 Regulatory Policies to Limit Exposures
Large Exposures to a Single Customer or Connected Parties -- Related Party Financing -- 7.3 Management Policies to Reduce Credit Risk -- Lending Authority -- Type of Loans and Distribution by Category -- Appraisal Process -- Loan Pricing -- Maturities -- Exposure to Geographic Areas or Economic Sectors -- Insistence on Availability of Current Financial Information -- Collections Monitoring -- Limit on Total Outstanding Loans -- Maximum Ratio of Loan Amount to the Market Value of Pledged Securities -- Impairment Recognition -- Renegotiated Debt Treatment -- Written Internal Guidelines -- 7.4 Analyzing Credit Risk -- Loan Portfolio Structure -- Loan Portfolio Review -- Interbank Deposits -- Off-Balance-Sheet Commitments -- 7.5 Asset Classification and Loan Loss Provisioning -- Asset Classification Categories -- Nonperforming Loans -- Overdue Interest -- Classifying Assets -- Loan Loss Provisioning -- Loss Assets and Workout Procedures -- 7.6 Assessing Credit Risk Management Capacity -- Lending Processes -- Human Resources Analysis -- Information Flows -- 8 Liquidity Risk Management -- Key Messages -- 8.1 The Need for Liquidity -- 8.2 Liquidity Management Policies -- Foreign Currency Aspects -- 8.3 The Regulatory Environment -- 8.4 The Structure of Funding -- Interbank Funding -- 8.5 Cash Flow Analysis -- 8.6 Volatility of Funding and Concentration of Deposits -- 8.7 Liquidity Risk Management Techniques -- 9 Managing Liquidity and Other Investment Portfolios -- Key Messages -- 9.1 Nature of the Liquidity Portfolio -- 9.2 Investment Policy -- Benchmark Position -- 9.3 Strategic Asset Allocation -- Central Bank Aspects -- 9.4 Benchmark Portfolio -- 9.5 Eligible Instruments -- 9.6 Credit Risk -- 9.7 Market Risk -- 9.8 Active Management -- 9.9 Risk Budgets -- Stop-Loss Limits -- Position Limits -- 9.10 Management Reporting -- Notes
10 Market Risk Management -- Key Messages -- 10.1 Sources of Market Risk: Selected Concepts -- Volatility -- Recognizing Price Changes and Marking to Market -- Interest Rate Risk -- Equity Risk -- Commodity Risk -- Currency Risk -- Other Risks -- 10.2 Measuring Interest Rate Sensitivity -- Interest-Rate Risk Sources -- Duration -- 10.3 Portfolio Risk Management -- Position Limits -- Stop-Loss Provisions -- Limits to New Market Presence -- Information Technology -- Organization -- 10.4 Market Risk Measurement: Value at Risk (VAR) as a Possible Tool -- Value at Risk -- 10.5 Risk and Performance Measurement -- Performance Reporting -- Interest Rate Risk Measurement Using Key Rate Duration -- Credit Spread Risk Measurement Using Key Rates -- 10.6 Stress Testing and Scenario Analysis -- 11 Currency Risk Management -- Key Messages -- 11.1 Introduction: Origin and Components of Currency Risk -- 11.2 Policies for Currency Risk Management -- Risk Exposure Limits -- Net Open Position Limits -- Currency Position Limits -- Other Position Limits -- Stop-Loss Provision -- Concentration Limit -- Settlement Risk -- Counterparty Risk -- Revaluation -- Liquidity Risk Concerns -- Accounting Treatment -- 11.3 Currency Risk Exposure and Business Strategy -- Spot Trading -- Forward Transactions -- Currency Swaps -- 11.4 Review of Currency Risk Management Procedures -- Capital Charges -- Alert Systems -- Staffing -- Information Systems -- 12 Asset-Liability Management -- Key Messages -- 12.1 Objective of Asset-Liability Management -- Asset-Liability Management Committee -- 12.2 Interest Rate Risk Management Responsibilities -- 12.3 Models for the Management of Interest Rate Risk in the Balance Sheet -- "Gap" Model -- Sensitivity Analysis -- Simulation -- Duration Analysis -- Current Market Practice -- Net Interest Income -- Economic Value of Equity
12.4 The Impact of Changes in Forecast Yield Curves
The third edition of 'Analyzing Banking Risk' provides a comprehensive overview of topics dealing with the assessment, analysis, and management of financial risks in banking.The publication emphasizes risk-management principles and stresses that key players in the corporate governance process are accountable for managing the different dimensions of financial risk.This third edition remains faithful to the objectives of the original publication. A significant new addition is the inclusion of chapters on the management of the treasury function. Advances made by the Basel Committee on Banking Supervision are reflected in the chapters on capital adequacy, transparency, and banking supervision.This publication should be of interest to a wide body of users of bank financial data. The target audience includes persons responsible for the analysis of banks and for the senior management or organizations directing their efforts
Description based on publisher supplied metadata and other sources
Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2020. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries
Link Print version: van Greuning, Hennie Analyzing Banking Risk : A Framework for Assessing Corporate Governance and Financial Risk Herndon : World Bank Publications,c2009 9780821377284
Subject Bank management.;Risk management.;Corporate governance
Electronic books
Alt Author Bratanovic, Sonja Brajovic
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