The concept of risk management serves as the unifying theme. A bank's asset and liability management committee (ALCO) or risk management committee is responsible for the overall financial planning and management of the bank's profitability and risk profile. The book emphasizes how managers can develop and implement strategies to maximize stockholders wealth by balancing the trade-off between banking risks and returns. One of the book's primary purposes is to explain how market risk (interest rate risk, equity price risk, and foreign exchange rate risk), liquidity risk, credit risk, capital/solvency risk and operational risk are measured and how decisions to alter a bank's risk profile affects profitability and growth opportunities. The book demonstrates how risk management decisions in different areas affect each other and the overall profitability and risk of the institution. Key Features Updated use of UBPR data and analysis: Discussion of the Uniform Bank Performance Report, created by the FDIC, has been expanded and includes discussion of the different ratios. Cash flow analysis in lending: Expanded discussion reflects new emphasis. Discussion of hedge accounting under FAS 133: Its implications for financial services companies are discussed along with hedge criteria, risk exposure, and the accounting standards. Revised discussion of interest rate futures, forwards and swaps as risk management tools. Added cases: Bank Performance Analysis, Commercial Lending, Consumer Lending, Liquidity Analysis, Project Finance and Managing a Bank?s Investment Portfolio, reflect current issues. Expanded Excel Template for Student Use: Credit and Cash Flow Analysis and Bank Performance Analysis allow students to learn from doing. Management Tools Included: Early, integrated coverage of management tools, including asset/liability management strategies, GAP & EVE analysis and the use of off-balance sheet instruments such as futures, forwards and swaps, serves as an analytical tool for managing interest rate risks. Table of ContentsChanging Structure of the Banking Industry Analyzing Bank Performance Managing Noninterest Income and Expense Determinants of Interest Rates and the Values of Fixed-Income Securities Managing Interest Rate Risk: GAP and Earnings Sensitivity Managing Interest Rate Risk: Duration Gap and EVE Sensitivity Using Derivatives to Manage Interest Rate Risk Liquidity Planning: Managing Short Term Liabilities and Cash Assets The Effective Use of Capital Overview of Credit Policy and Loan Characteristics Evaluating Commercial Loan Requests Evaluating Consumer Loans Managing the Investment Portfolio Global Banking Activities

Table of Contents:
Changing Structure of the Banking Industry • Analyzing Bank Performance • Managing Noninterest Income and Expense • Determinants of Interest Rates and the Values of Fixed-Income Securities • Managing Interest Rate Risk: GAP and Earnings Sensitivity • Managing Interest Rate Risk: Duration Gap and EVE Sensitivity • Using Derivatives to Manage Interest Rate Risk • Liquidity Planning: Managing Short Term Liabilities and Cash Assets • The Effective Use of Capital • Overview of Credit Policy and Loan Characteristics • Evaluating Commercial Loan Requests • Evaluating Consumer Loans • Managing the Investment Portfolio • Global Banking Activities