Contemporary Financial Intermediation - Arnoud W. A. Boot, Stuart I. Greenbaum, Anjan V. Thakor

Contemporary Financial Intermediation (eBook)

Arnoud W. A. Boot, Stuart I. Greenbaum, Anjan V. Thakor (Autoren)

eBook Download: PDF | EPUB

2015 | 3. Auflage
490 Seiten
Elsevier Science (Verlag)
978-0-12-405928-3 (ISBN)

In Contemporary Financial Intermediation, Third Edition, Greenbaum, Thakor and Boot offer a distinctive approach to financial markets and institutions, presenting an integrated portrait that puts information at the core. Instead of simply naming and describing markets, regulations, and institutions as competing books do, the authors explore the endless subtlety and plasticity of financial institutions and credit markets. This edition has six new chapters and increased, enhanced pedagogical supplements. The book is ideal for anyone working in the financial sector, presenting professionals with a comprehensive understanding of the reasons why markets, institutions, and regulators act as they do. Readers will find an unmatched, thorough discussion of the world's financial markets and how they function. - Provides a distinctive and thought-provoking approach to the world's financial markets - Explores the endless subtleties and plasticity of financial institutions and credit markets - Newly revised, with six new chapters and increased pedagogical supplements - Presents anyone working in the financial markets and sector with a comprehensive understanding of the inner workings of world markets

Stuart Greenbaum is a leading authority on banks. Formerly dean of the John M. Olin School of Business at Washington University in St. Louis, he spent twenty years at the Kellogg Graduate School of Management at Northwestern University, where he was the Director of the Banking Research Center and the Norman Strunk Distinguished Professor of Financial Institutions. Three times he was appointed to the Federal Savings and Loan Advisory Council and was twice officially commended for extraordinary public service. He is founding editor of the Journal of Financial Intermediation.

Preface

In writing this book we set out to modernize the teaching of bank management at universities and collegiate schools of business. Our goal is to expand the scope of the typical bank management course by (1) covering a broader, but still selective, variety of financial institutions, and (2) explaining the why of intermediation, as opposed to simply describing institutions, regulations, and market phenomena. Our approach is unapologetically analytical, and we have tried to make analysis an appealing feature of this book. We will consider the book a success if it leads students to not only discover the endless subtlety and plasticity of financial institutions and credit market practices, but also develop an appreciation for why these institutions, market practices, and governmental regulations are encountered. The unifying theme is that informational considerations are at the heart of what most banks do.

The novelty of our approach lies in both the analytical orientation and our choice and sequencing of topics. We begin with the questions of why financial intermediaries exist and what they do. We believe that understanding the why of financial intermediation will prepare the readers for the inescapable volatility of the future. Regulations, institutions, and claims will change, but the functional foundations on which financial intermediaries are built will remain basically the same.

This is the third edition of this book, and we have added our good friend Arnoud Boot as a coauthor. Arnoud’s input has helped us to provide a more complete treatment of global banking issues, including developments in the European Union, especially those since the global financial crisis of 2007–2009. Also the complexity of the financial system, the proliferation of linkages between institutions and financial markets, and systemic concerns warrant substantial attention. The significant changes that have occurred in global financial markets and regulation in the aftermath of this crisis made it essential to revise the second edition to reflect these changes.

Pedagogy

Each chapter (except the Introduction) begins with a glossary of terms that students will encounter while reading that chapter and will revisit throughout the book. Key nonbanking concepts are discussed in Chapter 1 to provide students with a clear basis on which to proceed. Within each subsequent chapter, we provide numerical examples, laying out each step from idea to solution. Each chapter ends with review questions, and many chapters include case studies to help students appreciate the power of the concepts as well as the complexities.

Moreover, because some chapters contain basic as well as more technical materials, more advanced discussions are isolated in boxes. Interesting, but inessential, information is likewise presented in isolated passages. This provides the instructor with enhanced flexibility in customizing the course.

Organization

The book contains 18 chapters and an introductory chapter. The introductory chapter describes the motivation and background for the book, highlighting the central role of financial intermediation in economic progress. It also briefly summarizes each chapter in the book and discusses the Great Recession that followed the financial crisis of 2007–2009, linking the various chapters to the developments before, during, and after the crisis.

In Part I, Chapter 1 discusses the key concepts of information economics, game theory, market completeness, options, and other topics we use throughout the book. We recommend that these concepts, which are central to the issues encountered in subsequent chapters, be discussed when needed in the context of subsequent chapters, rather than being dealt with at the outset of the course.

In Part II, Chapters 2 and 3 examine the functions of financial intermediaries. Chapter 2 describes the variety of financial intermediation and the basic services provided by financial intermediaries. Chapter 3 sets forth the information-based theory of financial intermediation and explains how banks evolved from goldsmiths.

Part III addresses the identification and management of the major risks in banking. Chapter 4 discusses the major risks banks face, particularly those that are basic in the provision of financial services: interest rate risk, liquidity risk, and credit risk. Each risk is first discussed as an independent source of risk. Then it is recognized that in practice these risks are correlated, which calls for an integrated approach to risk management. Enterprise risk management is discussed as one such approach. Chapter 5 takes a deep dive into interest rate risk, and this risk is explained from the vantage point of the arbitrage-free term structure of interest rates (under both certainty and uncertainty). Chapter 6 focuses on liquidity risk.

The discussion of credit risk is taken up in Part IV, which focuses on the major on-blalance-sheet activities of banks. Chapter 7 analyzes credit risk and the lending decision. Credit rationing and other lending anomalies are examined in Chapter 8, which also includes a discussion of multiperiod credit contracting issues. Chapter 9 covers a few special topics in credit, including syndicated loans, loan sales, and project finance.

Part V deals with “off-balance sheet” banking. Chapter 10 discusses commercial bank contingent claims, including loan commitments, letters of credit and bankers’ acceptances, interest rate swaps, and related contracts like caps, collars, and swaptions. Chapter 11 addresses securitization.

New to this edition, Parts VI and VII cover bank capital structure and the financial crises, respectively. Part VI covers the funding of the bank and has two chapters. Chapter 12 examines the economics of the deposit contract and also discusses (non-depository) “shadow banking”. Chapter 13 is devoted to how a bank determines its capital structure. It also includes a discussion on some of the common myths that seem to sometimes enter into discussions of bank capital structure. This is followed by a discussion of various theories of bank capital structure. Part VII, which contains Chapter 14, discusses financial crises, with a special focus on the 2007–2009 financial crisis. The events leading up to the 2007–2009 crisis, what happened during the crisis, and the effects of the crisis and policy responses are discussed.

Bank regulation is covered in Part VIII by Chapters 15 and 16. First, we discuss how government safety nets provided to banks necessitate regulation to cope with the moral-hazard created by the safety net. We then discuss the major agencies of bank regulation in different parts of the world, including Japan and the European Union, and the various regulations they impose on banks. Considerable attention is devoted to capital regulation and the Basel accords. Liquidity regulation and restrictions on bank activities are also discussed. Then in Chapter 16, we turn to an analysis of proposals for regulatory reform. In particular, we discuss the 1991 FDIC Improvement Act, the Financial Services Modernization Act of 1999, the Dodd–Frank Wall Street Reform and Consumer Protection Act, and E.U. Regulatory and Supervisory Overhaul, the Banking Union and the de-Larosière Report. There is considerable material in these chapters that is new to this edition.

Also new to this edition, part IX deals with evolution of banks, their interaction with financial markets, and the role of financial innovation. We begin with a discussion of the link between financial development and economic growth, and follow this with an examination of the role of financial innovation in this link. Both the bright and dark sides of financial innovation are discussed. Then we move on to the interaction between banks and markets. We end with a discussion of the competitive and complementary aspects of this relationship and the role of securitization, shadow banking, and credit-rating agencies in this dynamic.

Finally, in Part X’s Chapter 18, we look to the future, conjecturing about the evolution of banking in the United States and elsewhere. We discuss what we believe will be the major drivers of change: regulation, technology, and customer preference, and what this portends for banking.

We believe it will be difficult to cover the entire book in one academic quarter or even one semester. Students for whom this book is intended are not accustomed to thinking about asymmetric information and agency issues, so it takes time to become familiar with the basic concepts. We recommend that the instructor select a subset of topics, keeping in mind that it would probably require two semesters to comfortably complete the entire book. Possible course outlines are included in the Instructor’s Manual.

Whatever the approach chosen by the instructor, we hope that this book provides an accessible, if intellectually challenging, rendering of contemporary banking thought. Our own experience in teaching these materials has been rewarding. We hope the same is true for others.

Supplementary Materials

Instructor’s Manual/Test Bank/Transparency Master

Initially prepared by Daniel Indro of Kent State University and revised for this edition by Johan Maharjan of...

Erscheint lt. Verlag	2.9.2015
Sprache	englisch
Themenwelt	Recht / Steuern ► Wirtschaftsrecht
	Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
	Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre
ISBN-10	0-12-405928-7 / 0124059287
ISBN-13	978-0-12-405928-3 / 9780124059283

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