Understanding International Bank Risk [Hardcover]

In an era of globalisation, syndicated lending and consolidation within the banking industry, virtually all industries will have international dealings, whether directly or indirectly, and will therefore be exposed to consequential risks. An understanding of international risk, from that of bank of country failure to the idiosyncrasies of different regulatory frameworks, is essential for the modern banker. This book gives the reader a thorough understanding of how to calculate, analyse and manage such risks.

Foreword ix

About the Author xi

1 The Banking Background 1

1.1 Different types of banks and their risk profile 1

1.1.1 Bank failure and the financial services community 1

1.1.2 What do banks do? How do they earn their money? 3

1.1.3 Different types of banks and their revenue structures 6

1.1.4 Commercial banks 7

1.1.5 Investment banks 10

1.1.6 Risk profile of investment banks 13

1.1.7 Broking is a competitive business 13

1.1.8 Derivatives trading and AAA subsidiaries 13

1.1.9 The regulation of investment banks 14

1.1.10 “Analyst of the year” awards 14

1.2 Primary causes of bank failure 16

1.2.1 Types of failures 17

1.2.2 Causes of losses 18

1.2.3 Warning signals in predicting bank failure 24

1.2.4 Rescuing the bank! 28

1.2.5 Credit rating agencies 30

1.3 Bank failures – the four aces 31

1.3.1 Bank of Credit and Commerce International 31

1.3.2 Continental Illinois 34

1.3.3 Crédit Lyonnais 36

1.3.4 Rumasa 39

1.4 The macroeconomic el3"