The Principles of Banking (eBook)

MOORAD CHOUDHRY is a non-executive director at Recognise Bank Limited, in London, a non-executive director at the Loughborough Building Society, and an independent non-executive advisor on the Risk Committee at Nubank, in Sao Paulo. He was born in Bangladesh and lives in Surrey, England.

Forewords xix

Neal Ardley

Sharon Bowles

Henrique Fragelli

Oldrich Masek

Jason Oakley

Helen Sachdev

Preface xxxix

Acknowledgements xlv

About the Author li

Part I Banking, Bank Customer Business and Regulation 1

Chapter 1 Banking, bank business and financial statements 3

Chapter 2 Ethics, conduct and customer service 75

Chapter 3 Bank regulatory capital and the "Basel Rules" 97

Part II Bank Asset and Liability Management 159

Chapter 4 The yield curve 161

Chapter 5 Asset- liability management I 201

Chapter 6 Balance sheet management: money markets, FX, trading and hedging, and securitisation 251

Chapter 7 Managing interest- rate risk in the banking book (IRRBB) 303

Chapter 8 Bank Treasury operating model 333

Chapter 9 ALCO governance framework and terms of reference 351

Chapter 10 ALM sundries: asset encumbrance, hedge accounting, IFRS 9 and EIR 383

Part III Bank Liquidity Risk Management 401

Chapter 11 Principles of bank liquidity management 403

Chapter 12 Liquidity risk metrics 445

Chapter 13 Liquidity risk reporting 461

Chapter 14 Bank funds transfer pricing 469

Part IV Bank Strategy and Governance 491

Chapter 15 Bank strategy I: inputs and setting 493

Chapter 16 Bank strategy II: capital and funding management 521

Chapter 17 Principles of corporate governance 541

Part V Principles of Risk Management and Regulation 573

Chapter 18 The risk management framework 575

Chapter 19 Credit risk assessment and reporting principles 617

Chapter 20 Stress testing, ICAAP, ILAAP and reverse stress testing 647

Chapter 21 Recovery planning and resolution planning 693

Chapter 22 Sustainable banking and climate change risk management 703

Chapter 23 Case studies: analysis, problem solving and decision making 721

Chapter 24 Everything changes, and nothing changes: excerpts from a timeless work 753

Part VI Guide to the Companion Website 761

Chapter 25 Applications software, policy templates and spreadsheet models 763

Afterword 771

List of Terms and their Abbreviations 775

Index 781

Praise for The Principles of Banking, Second Edition

"This is a superb book."
--Martin Barber, Director, BAE Syatems Digital Intelligence, Lancashire

"The Principles of Banking is easily the most important text for anyone in banking today and should be required reading for all personal development plans. When I was a regulator at the UK Financial Services Authority, managing the change in control team, I was responsible for assessing and granting regulatory approvals for complex banking transactions, such as Virgin Money's takeover of Northern Rock. I relied heavily on Professor Choudhry's text as a reference throughout the banking license approval process."
--Nihar Mehta, Chief Corporate Development Officer, Monument Bank Ltd, London

"If it has kicked off between you and him, every single one of us would have run down there to help you out! And thanks for this great book."
--Alex Haigh, Captain, Newdigate FC, West Sussex League

"When I taught a banking course at my business school, I had a hard time finding textbooks that could explain what banking was really like from the perspective of a banker, until I came across books by Professor Choudhry. Moorad's books reflect how bankers look at and practice banking, and provide a non-theoretical and practical approach to the subject."
--Ted Teo, Adjunct Assistant Professor, NUS Business School, Singapore

"A magnificent, well-crafted and masterfully updated new edition of the ever popular The Principles of Banking, it remains clear, practical and well balanced. Very highly reccommended!"
--Mohamoud Barre Dualeh, Head of Products and Cards Business, Alizz Islamic Bank, Muscat