Contemporary Financial Intermediation, Second Edition (Academic Press Advanced Finance)

666 Pages·2007·5.47 MB·English

by  Stuart I. Greenbaum

Contemporary Financial Intermediation
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Contemporary Financial
Intermediation
Second Edition
Stuart I. Greenbaum
Washington University in St. Louis
Anjan V. Thakor
Washington University in St. Louis
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LibraryofCongressCataloging-in-PublicationData
Greenbaum,StuartI.
ContemporaryWnancialintermediation/StuartI.Greenbaum,AnjanV.Thakor.–2nded.
p.cm.
Originallypublished:FortWorth:DrydenPress,1995.
Includesbibliographicalreferencesandindex.
1.Banksandbanking–UnitedStates.2.Financialservicesindustry–UnitedStates.3.Intermediation
(Finance).4.Bankmanagement.I.Thakor,AnjanV.II.Title.
HG2491.G727 2007
332.10973–dc22
2007000154
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ISBN13:978-0-12-299053-3
ISBN10:0-12-299053-6
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To Elaine, Regina, and Nate
My spiritual lenders of last resort
Stuart I. Greenbaum
To my parents, Lata and Viru
For everything that made this possible
Anjan V. Thakor
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Abbreviated Contents
Preface xv
Acknowledgments xix
About the Authors xxi
PART I THE BACKGROUND 1
A Friendly Conversation 3
Chapter 1 Basic Concepts 13
PART II WHAT IS FINANCIAL INTERMEDIATION? 39
Chapter 2 The Nature and Variety of Financial Intermediation 41
Chapter 3 The What, How, and Why of Financial Intermediaries 91
PART III MAJOR ‘‘ON-BALANCE-SHEET’’ RISKS IN BANKING 125
Chapter 4 Major Risks Faced by Banks 127
Chapter 5 Spot Lending 169
vii
viii ABBREVIATEDCONTENTS
Chapter 6 Further Issues in Bank Lending 227
Chapter 7 Special Topics in Credit: Syndicated Loans, Loan Sales,
and Project Finance 279
PART IV OFF THE BANK’S BALANCE SHEET 293
Chapter 8 Off-Balance Sheet Banking and Contingent Claims Products 295
Chapter 9 Securitization 345
PART V THE DEPOSIT CONTRACT 395
Chapter 10 The Deposit Contract and Insurance 397
PART VI BANK REGULATION 439
Chapter 11 Objectives of Bank Regulation 441
Chapter 12 Milestones in Banking Legislation and Regulatory Reform 479
PART VII OVERALL MANAGEMENT OF THE BANK 519
Chapter 13 Management of Risks and Opportunities in Banking 521
PART VIII CORPORATE CONTROL AND GOVERNANCE 559
Chapter 14 Mergers and Acquisitions 561
Chapter 15 Investment Banking 587
PART IX THE FUTURE 609
Chapter 16 The Future 611
INDEX 619
Extended Contents
Preface xv
Acknowledgments xix
About the Authors xxi
PART I THE BACKGROUND 1
A Friendly Conversation 3
Introduction 3
The Conversation: 1991 3
Follow-Up to the Conversation: 2007 11
Chapter 1 Basic Concepts 13
Introduction 13
Risk Preferences 13
DiversiWcation 16
Riskless Arbitrage 19
Options 20
Market EYciency 21
Market Completeness 22
Asymmetric Information and Signaling 24
Agency and Moral Hazard 29
Time Consistency 32
ix