ABOUT THE BOOK

The unifying theme of the book is risk management. The material is divided into six parts, each consisting of chapters that cover related issues. As a lead-in to each chapter, the text will describe a current issue or provide an example of a key topic discussed in the chapter. This introduction reinforces the risk focus by emphasizing that managers make both good and bad decisions, but consistent application of finance theory and models should lead to a better understanding of the trade-off between risk and return. Part 1, Overview of the Banking Industry and Regulation, provides background information related to bank management and current banking trends. Part 2, Evaluating Bank Performance, examines the basic risk and return features of commercial banks and how analysts evaluate performance. Part 3, Managing Interest Rate Risk, demonstrates how banks measure and manage interest rate risk. Part 4, Managing the Cost of Funds, Bank Capital, and Liquidity, describes the features of bank liabilities and regulatory capital requirements. Part 5, Extending credit to Businesses and Individuals, addresses how banks manage credit risk. Part 6, Managing the Investment Portfolio and Special Topics, describes the role of fixed-income securities in helping a bank meet profit and risk objectives.