Bank asset and liability management

163 Pages·2018·23.396 MB·English

(cid:2)
TrimSize:7inx9.625in HKIB ffirs.tex V1-01/02/2018 8:24pm Pageii
(cid:2) (cid:2)
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ffirs.tex V1-01/02/2018 8:24pm Pagei
Bank Asset and Liability
Management
(cid:2) (cid:2)
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ffirs.tex V1-01/02/2018 8:24pm Pageii
(cid:2) (cid:2)
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ffirs.tex V1-01/02/2018 8:24pm Pageiii
Bank Asset and Liability
Management
(cid:2) (cid:2)
The Hong Kong Institute
of Bankers
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ffirs.tex V1-01/02/2018 8:24pm Pageiv
Copyright©2018byJohnWiley&SonsSingaporePte.Ltd.
PublishedbyJohnWiley&SonsSingaporePte.Ltd.
1FusionopolisWalk,#07-01,SolarisSouthTower,Singapore138628
Allrightsreserved.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformorby
anymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptasexpressly
permittedbylaw,withouteitherthepriorwrittenpermissionofthePublisher,orauthorisationthrough
paymentoftheappropriatephotocopyfeetotheCopyrightClearanceCenter.Requestsforpermissionshould
beaddressedtothePublisher,JohnWiley&SonsSingaporePte.Ltd.,1FusionopolisWalk,#07-01,Solaris
SouthTower,Singapore138628,tel:[phone],fax:[phone],e-mail:[email protected].
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsin
preparingthisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyorcompleteness
ofthecontentsofthisbookandspecificallydisclaimanyimpliedwarrantiesofmerchantabilityorfitnessfora
particularpurpose.Nowarrantymaybecreatedorextendedbysalesrepresentativesorwrittensalesmaterials.
Theadviceandstrategiescontainedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha
professionalwhereappropriate.Neitherthepublishernortheauthorshallbeliableforanydamagesarising
herefrom.
OtherWileyEditorialOffices
JohnWiley&Sons,111RiverStreet,Hoboken,NJ07030,USA
(cid:2) JohnWiley&Sons,TheAtrium,SouthernGate,Chichester,WestSussex,PO198SQ,UnitedKingdom (cid:2)
JohnWiley&Sons(Canada)Ltd.,5353DundasStreetWest,Suite400,Toronto,Ontario,M9B6HB,Canada
JohnWiley&SonsAustraliaLtd.,42McDougallStreet,Milton,Queensland4064,Australia
Wiley-VCH,Boschstrasse12,D-69469Weinheim,Germany
LibraryofCongressCataloging-in-PublicationData
Names:TheHongKongInstituteofBankers,editor.
Title:BankAssetandLiabilityManagement/byTheHongKongInstituteof
Bankers.
Description:Hoboken:Wiley,2018.|Includesindex.|
Identifiers:LCCN2017049293(print)|LCCN2017050855(ebook)|ISBN
9780470827550(pdf)|ISBN9780470827567(epub)|ISBN9780470827536
(paperback)|ISBN9780470827550(ePDF)|ISBN9781119444497(e-bk)
Subjects:LCSH:Asset-liabilitymanagement.|Bankmanagement.|BISAC:
BUSINESS&ECONOMICS/Banks&Banking.
Classification:LCCHG1615.25(ebook)|LCCHG1615.25.B362017(print)|DDC
332.1068/1–dc23
LCrecordavailableathttps://lccn.loc.gov/2017049293
CoverDesign:Wiley
CoverImages:StuttgartFountainandPalace©iStockPhoto.com/RolfWeschke;technobackground
©polygraphus/Shutterstock;marble©rusm/iStockphoto
Typesetin11/14pt,ArnoProbySPiGlobal,Chennai,India.
PrintedinSingaporebyMarkonoPrintMedia
10 9 8 7 6 5 4 3 2 1
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ftoc.tex V1-01/02/2018 8:24pm Pagev
Contents
(cid:2) (cid:2)
Preface ix
PART 1 ASSET AND LIABILITY MANAGEMENT 1
1 Managing Bank Profitability 3
Introduction 4
StructureandRegulation 4
FinancialStatements 9
EvaluatingBanks’Profits 13
MeasuringBankProfitability 16
Summary 24
KeyTerms 25
ReviewQuestions 26
FurtherReading 26
2 Asset and Liability Management Committee (ALCO) 27
Introduction 28
ALCORoleandFunctions 28
ALCOPlan 39
Summary 46
v
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ftoc.tex V1-01/02/2018 8:24pm Pagevi
vi/ CONTENTS
KeyTerms 46
ReviewQuestions 47
FurtherReading 47
3 Managing Bank Assets and Liabilities 49
Introduction 50
ManagingBankAssets 50
ManagingBankLiabilities 55
Summary 59
KeyTerms 60
ReviewQuestions 61
FurtherReading 61
PART 2 MANAGING LIQUIDITY RISK AND INTEREST
RATE RISK 63
4 Liquidity Management 65
Introduction 66
DefinitionandMeasuresofLiquidity 67
DeterminingFundingNeeds 73
StressTests 79
(cid:2) (cid:2)
Summary 81
KeyTerms 82
ReviewQuestions 83
FurtherReading 83
5 Managing Interest Rate Risk 85
Introduction 86
TypesofInterestRateRisk 86
InterestRateGapAnalysis 87
DurationAnalysis 90
BasisPointValue 93
ImmunisationandHedgingInterestRateRisk 93
NetInterestIncomeSensitivityAnalysis 96
Securitisation 97
Summary 99
KeyTerms 100
ReviewQuestions 100
FurtherReading 101
6 ALM in Changing Market Conditions 103
Introduction 104
LessonsfromtheGlobalFinancialCrisis 104
FromStressTestingtoContingencyPlanExecution 108
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ftoc.tex V1-01/02/2018 8:24pm Pagevii
Contents/ vii
ALMStrategyandInterestRateCycle 110
Summary 114
KeyTerms 115
ReviewQuestions 115
FurtherReading 116
7 Case Studies 117
Introduction 118
LiquidityRisk:RoyalBankofScotlandFailsStressTest(2016) 119
LiquidityRisk:LehmanBrothers(2008) 126
ContinentalIllinoisNationalBank’sElectronicCashOut(1984) 131
BankofNewEngland’sSilentRun(1991) 137
Summary 140
KeyTerms 141
ReviewQuestions 142
FurtherReading 142
Appendix A: Principles for Sound Liquidity Risk Management
and Supervision 143
Index 147
(cid:2) (cid:2)
(cid:2)
(cid:2)
TrimSize:7inx9.625in HKIB ftoc.tex V1-01/02/2018 8:24pm Pageviii
(cid:2) (cid:2)
(cid:2)