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Bank Management Hardcover – 14 Aug 2009

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Product details

  • Hardcover: 820 pages
  • Publisher: South Western College; 7 edition (14 Aug. 2009)
  • Language: English
  • ISBN-10: 0324655789
  • ISBN-13: 978-0324655780
  • Product Dimensions: 27.7 x 21.6 x 3.8 cm
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: 1,201,958 in Books (See Top 100 in Books)
  • See Complete Table of Contents

Product Description


1. Banking and the Financial Services Industry. Credit Crisis of 2007-2009. Impact on Banks and the Banking Environment. How Do Banks Differ? Trends in the Structure of U.S. Banks. Organizational Structure and Financial Services Business Models. S-Corporation Banks. Financial Services Business Models. Transactions Banking versus Relationship Business Models. Universal Banking. Different Channels for Delivering Banking Services. Branch Banking. Automated Teller Machines. Internet (Online) Banking. Call Centers. Mobile Banking. 2. Government Policies and Regulation. Historical Bank Regulation. Products and Services. Goals and Functions of Depository Institution Regulation. Ensure Safety and Soundness and Provide an Efficient and Competitive System. Supervision and Examination. New Charters. Federal Deposit Insurance. Product Restrictions: Depository Institutions versus Nondepository Institutions. Shortcomings of Restrictive Bank Regulation. Maintaining Monetary Stability and the Integrity of the Payments System. The Role of the Central Bank in the Economy: The Federal Reserve System. Monetary Policy. The Federal Reserve's Crisis Management Tools. The Role of Depository Institutions in the Economy. Efficient and Competitive Financial System. Consumer Protection. Trends in Federal Legislation and Regulation. Key Federal Legislation: 1970-1993. Key Federal Legislation: 1994-2000. Key Federal Legislation: 2001-2006. Key Federal Legislation: 2007-2008. Current Unresolved Regulatory Issues. Capital Adequacy. Regulatory Reform. 3. Analyzing Bank Performance. Commercial Bank Financial Statements. The Balance Sheet. The Income Statement. The Relationship Between the Balance Sheet and Income Statement. The Return on Equity Model. Profitability Analysis. Expense Ratio and Asset Utilization. Managing Risk and Returns. Credit Risk. Liquidity Risk. Market Risk. Operational Risk. Legal and Reputation Risk. Capital or Solvency Risk. Off-Balance Sheet Risk. Evaluating Bank Performance: An Application. Profitability Analysis for PNC in 2007. Risk Analysis for PNC in 2007. PNC's Profitability versus Risk: 2003-2007. Maximizing the Market Value of Bank Equity. Camels Ratings. Performance Characteristics of Banks by Size. Financial Statement Manipulation. Off-Balance Sheet Activities. 4. Managing Noninterest Income and Noninterest Expense. Noninterest Income. Deposit Service Fees. Noninterest Expense. Key Ratios. Which Lines of Business and Customers are Profitable? Line-Of-Business Profitability Analysis. Customer Profitability Analysis. Aggregate Profitability Results from Customer Profitability Analysis. What is the Appropriate Business Mix? Strategies for Managing Noninterest Expense. Cost Management Strategies. Revenue Enhancement. Contribution Growth. 5. The Performance of Nontraditional Banking Companies. The Financial Performance of Goldman Sachs. Goldman Sachs's Income Statement. Goldman Sachs's Balance Sheet. Key Performance Ratios. Risks Faced by Goldman Sachs. Goldman's Risk Profile. The Financial Performance of Mutual of Omaha Bank. Mutual of Omaha Bank's Risk Profile. The Financial Performance of BMW Financial Services and BMW Bank of North America. BMW Bank's Risk Profile. 6. Pricing Fixed-Income Securities. The Mathematics of Interest Rates. Future Value and Present Value: Single Payment. Future Value and Present Value: Multiple Payments. The Relationship Between Interest Rates and Option-Free Bond Prices. The Size of Coupon Influences Bond Price Sensitivity. Duration and Price Volatility. Duration as an Elasticity Measure. Measuring Duration. Duration of a Zero Coupon Bond. Comparative Price Sensitivity. Recent Innovations in the Valuation of Fixed-Income Securities and Total Return Analysis. Total Return Analysis. Valuing Bonds as a Package of Cash Flows. Money Market Yields. Interest-Bearing Loans with Maturities of One Year or Less. 360-Day versus 365-Day Yields. Discount Yields. Yields on Single-Payment, Interest-Bearing Securities. 7. Managing Interest Rate Risk: GAP and Earnings Sensitivity. Measuring Interest Rate Risk with GAP. Traditional Static GAP Analysis. What Determines Rate Sensitivity? Factors Affecting Net Interest Income. Rate, Volume, and Mix Analysis. Rate Sensitivity Reports. Strengths and Weaknesses of Static GAP Analysis. Earnings Sensitivity Analysis. Exercise of Embedded Options in Assets and Liabilities. Different Interest Rates Change by Different Amounts at Different Times. Earnings Sensitivity Analysis: An Example. Income Statement GAP. Managing the GAP and Earnings Sensitivity Risk. 8. Managing Interest Rate Risk: Economic Value of Equity. Measuring Interest Rate Risk with Duration Gap. Duration, Modified Duration, and Effective Duration. Duration Gap Model. A Duration Application for Banks. Economic Value of Equity Sensitivity Analysis. EVE Sensitivity Analysis: An Example. Earnings Sensitivity Analysis versus EVE Sensitivity Analysis: Which Model Is Better? Strengths and Weaknesses: DGAP and EVE Sensitivity Analysis. A Critique of Strategies for Managing Earnings and Economic Value of Equity Sensitivity. GAP and DGAP Management Strategies: What Are Your Bets? Interest Risk Management: An Example. Yield Curve Strategies. 9. Using Derivatives to Manage Interest Rate Risk. Characteristics of Financial Futures. A Brief Example. Types of Futures Traders. The Mechanics of Futures Trading. An Example: 90-Day Eurodollar Time Deposit Futures. Expectations Embedded in Futures Rates. Daily Marking-to-Market. Speculation versus Hedging. Speculators Take On Risk to Earn Speculative Profits. Hedgers Take Positions to Avoid or Reduce Risk. A Long Hedge: Reduce Risk Associated with a Decrease in Interest Rates. A Short Hedge: Reduce Risk Associated with an Increase in Interest Rates. Change in the Basis. Basis Risk and Cross Hedging. Microhedging Applications. Creating a Synthetic Liability with a Short Hedge. The Mechanics of Applying a Microhedge. Macrohedging Applications. Hedging: GAP or Earnings Sensitivity. Hedging: Duration Gap and EVE Sensitivity. Accounting Requirements and Tax Implications. Using Forward Rate Agreements to Manage Rate Risk. Forward Rate Agreements: An Example. Potential Problems with FRAs. Basic Interest Rate Swaps as a Risk Management Tool. Characteristics. Interest Rate Caps and Floors. Buying an Interest Rate Cap. Buying an Interest Rate Floor. Interest Rate Collar and Reverse Collar. Protecting Against Falling Interest Rates. Strategy: Use a Basic Interest Rate Swap; Pay Floating and Receive Fixed. Strategy: Buy a Floor on the Floating Rate. Strategy: Buy a Reverse Collar; Sell a Cap and Buy a Floor on the Floating Rate. Protecting Against Rising Interest Rates. Strategy: Use a Basic Interest Rate Swap; Pay Fixed and Receive Floating. Strategy: Buy a Cap on the Floating Rate. Strategy: Buy a Collar. 10. Funding the Bank. The Relationship Between Liquidity Requirements, Cash, and Funding Sources. Recent Trends in Bank Funding Sources. Characteristics of Retail-Type Deposits. Transactions Accounts. Nontransactional Accounts. Estimating the Cost of Deposit Accounts. Calculating the Average Net Cost of Deposit Accounts. Characteristics of Large Wholesale Liabilities. Jumbo CDs (CDs). Individual Retirement Accounts. Foreign Office Deposits. Borrowing Immediately Available Funds. Borrowing from the Federal Reserve. Other Borrowing from the Federal Reserve. Federal Home Loan Bank Advances. Electronic Money. Check 21. Measuring the Cost of Funds. The Average Historical Cost of Funds. The Marginal Cost of Funds. Costs of Independent Sources of Funds. Weighted Marginal Cost of Total Funds. Marginal Cost Analysis: An Application. Funding Sources and Banking Risks. Funding Sources: Liquidity Risk. Funding Sources: Interest Rate Risk. Funding Sources: Credit and Capital Risk. 11. Managing Liquidity. Meeting Liquidity Needs. Holding Liquid Assets. Borrowing Liquid Assets. Objectives of Cash Management. Reserve Balances at the Federal Reserve Bank. Required Reserves and Monetary Policy. The Impact of Sweep Accounts on Required Reserve Balances. Meeting Legal Reserve Requirements. Historical Problems with Reserve Requirements. Lagged Reserve Accounting. An Application: Reserve Calculation Under LRA. Correspondent Banking Services. Liquidity Planning. Short-Term Liquidity Planning. Managing Float. Liquidity versus Profitability. The Relationship Between Liquidity, Credit Risk, and Interest Rate Risk. Traditional Aggregate Measures of Liquidity Risk. Asset Liquidity Measures. Liability Liquidity Measures. Longer-Term Liquidity Planning. Contingency Plans. Considerations in the Selection of Liquidity Sources. 12. The Effective Use of Capital. Why Worry about Bank Capital? Risk-Based Capital Standards. The 1986 Basel Agreement. Risk-Based Elements of Basel I. What Constitutes Bank Capital? Tier 3 Capital Requirements for Market Risk under Basel I. Basel II Capital Standards. Weaknesses of the Risk-Based Capital Standards. What is the Function of Bank Capital? How Much Capital is Adequate? The Effect of Capital Requirements on Bank Operating Policies. Limiting Asset Growth. Changing the Capital Mix. Changing Asset Composition. Pricing Policies. Shrinking the Bank. Characteristics of External Capital Sources. Subordinated Debt. Common Stock. Preferred Stock. Trust preferred Stock. TARP Capital Purchase Program. Leasing Arrangements. Capital Planning. Applications. Depository Institution Capital Standards. Federal Deposit Insurance. FDIC Insurance Assessment Rates. Problems with Deposit Insurance. Weakness of the Current Risk-Based Deposit Insurance System. 13. Overview of Credit Policy and Loan Characteristics. Recent Trends in Loan Growth and Quality. Measuring Aggregate Asset Quality. Trends in Competition for Loan Business. The Credit Process. Values Driven. Current-Profit Driven. Market-Share Driven. Business Development and Credit Analysis. Credit Execution and Administration. Loan Review. Characteristics of Different Types of Loans. Real Estate Loans. Commercial Loans. Agricultural Loans. Consumer Loans. Venture Capital. 14. Evaluating Commercial Loan Requests & Managing Credit Risk. Fundamental Credit Issues. Character of the Borrower and Quality of Data Provided. Use of Loan Proceeds. How Much Does the Borrower Need? The Loan Amount. The Primary Source and Timing of Repayment. Secondary Source of Repayment: Collateral. Evaluating Credit Requests: A Four-Part Process. Overview of Management, Operations, and the Firm's Industry. Common Size and Financial Ratio Analysis. Cash-Flow Analysis. Cash-Flow Analysis for Prism Industries. Financial Projections. Risk-Classification Scheme. Credit Analysis Application: Wade's Office Furniture. Common Size and Financial Ratios Analysis: Wade's Office Furniture. Cash-Based Income Statement: Wade's Office Furniture. Pro Forma Analysis: Wade's Office Furniture. Evaluation of Collateral: Wade's Office Furniture. Sensitivity Analysis. Managing Risk with Loan Sales and Credit Derivatives. Underwriting Loan Sales, Participations and Syndications. Shared National Credits. Credit Enhancements. Credit Default Swaps. 15. Evaluating Consumer Loans. Types of Consumer Loans. Installment Loans. Noninstallment Loans. What Happens When Housing Prices Fall? Equal Credit Opportunity. Prohibited Information Requests. Credit Scoring Systems. Credit Reporting. Truth in Lending. Fair Credit Reporting. Community Reinvestment. Bankruptcy Reform. Credit Analysis. Policy Guidelines. Acceptable Loans. Unacceptable Loans. Evaluation Procedures: Judgmental and Credit Scoring. An Application: Credit Scoring a Consumer Loan. Your FICO Credit Score. An Application: Indirect Lending. Recent Risk and Return Characteristics of Consumer Loans. Revenues from Consumer Loans. Consumer Loan Losses. Interest Rate and Liquidity Risk with Consumer Credit. 16. Managing the Investment Portfolio. Dealer Operations and the Securities Trading Account. Objectives of the Investment Portfolio. Accounting for Investment Securities. Safety or Preservation of Capital. Liquidity. Yield. Diversify Credit Risk. Help Manage Interest Rate Risk Exposure. Pledging Requirements. Composition of the Investment Portfolio. Characteristics of Taxable Securities. Money Market Investments. Capital Market Investments. Prepayment Risk on Mortgage-Backed Securities. Alternative Mortgage-backed Securities. Corporate, Foreign, and Taxable Municipal Bonds. Asset-Backed Securities. Characteristics of Municipal Securities. Money Market Municipals. Capital Market Municipals. Credit Risk in the Municipal Portfolio. Liquidity Risk. Establishing Investment Policy Guidelines. Return Objectives. Portfolio Composition. Liquidity Considerations. Credit Risk Considerations. Interest Rate Risk Considerations. Total Return versus Current Income. Active Investment Strategies. The Maturity or Duration Choice for Long-Term Securities. Passive Maturity Strategies. Active Maturity Strategies. Interest Rates and the Business Cycle. The Impact of Interest Rates on the Value of Securities with Embedded Options. Issues for Securities with Embedded Options. The Roles of Duration and Convexity in Analyzing Bond Price Volatility. Impact of Prepayments on Duration and Yield for Bonds with Options. Total Return and Option-Adjusted Spread Analysis of Securities with Options. Comparative Yields on Taxable versus Tax-Exempt Securities. After-Tax and Tax-Equivalent Yields. The Yield comparison for Commercial Banks. The Effective Tax on Incremental Municipal Interest Earned by Commercial Banks. The Impact of the Tax Reform Act of 1986. Qualified versus Nonqualified Municipals. Strategies Underlying Security Swaps. Analysis of a Classic Security Swap. Swap with Minimal Tax Effects. 17. Global Banking Activities. U.S. Depository Institutions in the World Market. Impact of the Crises of 2007-2008. Market Share of Foreign Financial Institutions Operating in the United States. The European Community. Universal Banking Model. Organizational Structure of U.S. Banks with Foreign Operations. International Financial Markets. The Eurocurrency Market. The Eurobond Market. Eurocredits. International Lending. Short-Term Foreign Trade Financing. Direct International Loans. Foreign Exchange Activities. Foreign Exchange Risk. Currency Exchange. The Relationship Between Foreign Exchange Rates and Interest Rates. Price Risk with Foreign Currency.

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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 3.5 out of 5 stars 30 reviews
28 of 29 people found the following review helpful
5.0 out of 5 stars This book motivated my carreer as a banker 1 Mar. 2002
By Juan Mendoza - Published on Amazon.com
Format: Hardcover
Professor Koch's book is excellent. I highly recommend it to anyone who is interested in banking. The book is great to read if you don't know much about the industry or if you are an expert. I studied with Professor Koch at USC at the undergrad level and decided to go into banking thanks to his class and book. The book covers liquidity management, credit management, capital management, asset and liability management (focus on interest rate risk management), balance sheet analysis and other interestig topics. I've worked in several areas of commercial banks in Ecuador, namely credit, treasury, asset and liability management and finance. The book has always come in handy. I've also used it to teach at the University level down here.
It is especially interesting how every chapter is related in some way to the ALCO (Asset and Liability Management Commitee).
The cases are also very interesting. In Ecuador we recently had a liquidity crunch in the banking system. I was very much surprised to find an anylisis of a case very similar to what was happening down here in the book. The case was on the Contintental Illinois bank failure.
In other words, I think this book is a must for anyone interested in the industry.
39 of 44 people found the following review helpful
2.0 out of 5 stars Revised Opinion - AVOID 13 Jan. 2001
By Erich Riesenberg - Published on Amazon.com
Format: Hardcover
This is an update of a prior review I wrote of this book, I changed my mind. I hadn't read the entire book but had been impressed with what I had read. The book does cover many aspects of commercial banking including regulations, capital and liquidity management, things of most interst to me as an analyst. However, a significant problem is that many of the examples used appear to be incorrect. For instance, the text often does not match the accompanying exhibits or tables. Perhaps the book was not edited well during an update to a new edition, and either the text or the exhibit/table was updated but not both (ie, in numerous cases they disagree). Whatever the reason, the numerous typographical errors made the book difficult to read, especially in a "self-study" situation. I'm looking elsewhere for a better guide.
20 of 24 people found the following review helpful
5.0 out of 5 stars A "Must Read" for Anyone in Banking & Finance. Outstanding! 31 Aug. 1999
By A Customer - Published on Amazon.com
Format: Hardcover
I've been in banking education for almost 18 years and a vast library of texts have crossed my desk. This fourth edition of Bank Management is vastly superior to anything I've seen to date. Will become an industry standard or should. Comprehensive, but not tedious. Well researched. Information rich. Authors Koch and MacDonald--who obviously are at the top of their game--have made it understandable to expert and novice alike. I found the "Contemporary Issues" sidebars in each chapter especially fascinating and instructive. This is one book that will be feathered with post-it notes--to mark the pages that you want to return to time and again.
5 of 6 people found the following review helpful
2.0 out of 5 stars Lots of information, horrible presentation 22 Sept. 2006
By Jason K - Published on Amazon.com
Format: Hardcover
I am in my last year of school and preparing to embark on a career in banking. Out of all the finance and economics (I'm a double major) textbooks I have used this is the absolute worst bar none. While the text has a very large amount of information that same information is simply thrown at you with no real presentation.

One other thing that bothers me (possible the most) is the fact that I get severe headaches when I read this text. I have never read a book before with text this small. To me this says something since I am a voracious reader and frequently am reading 3-4 novels while also studying for my classes.
2 of 2 people found the following review helpful
2.0 out of 5 stars Review of 7th edition 6 Nov. 2011
By J. Nelson - Published on Amazon.com
Format: Hardcover
I have been using this textbook for almost a full semester now for an online class in bank management. The book starts off ok (if a bit dry), but the errors and poor editing become worse as the book progresses. This edition contains many typos, and several of the end of chapter questions seem to refer to topics covered in later chapters. Maybe the topics were in a different order in earlier additions and the questions were not revised. In any event, if your class requires this book, either don't take it online or pick a different class. If you do decide to take an online class using this book, google is your friend.
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