Banking and Financial Institutions: A Guide for Directors, Investors, and Borrowers(615 Wiley Finance)

A practical guide to the evolving world of banking and financial institutions Due to various factors, ranging from the global financial crisis that began in 2007 to new laws such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, banks and financial institutions have had to alter the way they operate. Understanding how these institutions function in the face of recent challenges is essential for anyone associated with them. That's why Professor Benton Gup has created Banking and Financial Institutions. Opening with a detailed discussion of the causes of the recent financial crisis, as well as a look at some lessons we can learn from it and other crises, this reliable resource quickly moves on to put modern banking in perspective. Filled with in-depth insights and expert advice, Banking and Financial Institutions examines the essential aspects of this discipline and shows you what it takes to make the most informed decisions possible, whether you're a bank director, investor, or borrower. Explains the economic role of financial intermediaries, including the financial institutions that bring borrowers and savers together Addresses how banks can hedge some of their interest rate and credit risks by using various types of derivatives contracts, options, and futures Analyzes the process of commercial and industrial (C&I) lending, from how banks make loans and the types of C&I loans to the role of collateral Allows you to evaluate a bank's financial statements and performance Explores payments systems, including cash, checks, credit cards, wire transfers, and other means of payment Rounding out this detailed banking guide is an informative chapter on Islamic banking written by Professor Mohamed Ariff of Bond University, as well as a chapter filled with tips for bank directors, borrowers, and investors contributed by John Harrison, the Superintendent of Banks, Alabama State Banking Department.

Table of Contents:
Preface xi Acknowledgments xv About the Author xvii CHAPTER 1 Lessons Learned from Banking Crises 1 International Financial Crises 1 What Caused the Crisis in the United States? 3 Lessons Learned from Financial Crises 13 CHAPTER 2 The Economic Role of Financial Intermediaries 21 The Economic and Financial System 21 Intermediation 23 Asset Management 32 Individuals 33 Interest Rates 34 Current Trends in Financial Intermediaries 35 The Changing Role of Banks 38 Alternative Financial Services 40 CHAPTER 3 The Evolving Legal Environment 41 What Is a Bank? 41 Why Are Banks Regulated? 42 Selected Banking Laws 47 Services Provided by Banks 50 What Bank Regulators Do 54 Is Prudential Bank Regulation Effective? 57 Appendix 3A: FDIC Definitions of Commercial Banks 64 Appendix 3B: Selected Banking Legislation 68 Recent Laws 74 CHAPTER 4 Asset/Liability Management 75 An Overview of Market Rates of Interest 75 The Effects of Interest Rate Risk on Income and Market Value 84 Managing Interest Rate Spreads 86 Duration Gap and Economic Value of Equity 88 Duration Gap Management Strategies 91 CHAPTER 5 Hedging and Risk Management 95 Derivatives 95 Risks Associated with Derivatives 96 Derivative Contracts by Product and Type 99 Hedging with Interest Rate Swaps 100 Hedging with Currency Swaps 102 Hedging with Options 104 Hedging with Futures 105 Covered Bonds 110 Special Purpose Vehicles 111 Enterprise Risk Management 112 Additional Educational Resources 114 CHAPTER 6 Commercial and Industrial Loans 115 The Role of Asymmetric Information in Lending 115 The Competitive Environment 116 The Board of Directors’ Written Loan Policy 120 Seven Ways to Make Loans 122 Collecting Loans 125 Principal Lending Activities 126 Collateral 131 The Lending Process 134 International Lending 145 Summary 147 CHAPTER 7 Real Estate and Consumer Lending 149 Real Estate Lending 149 Characteristics of Mortgage Loans 152 Consumer Lending 165 Finance Charges 174 Annual Percentage Rate 176 Real Estate and Consumer Credit Regulation 180 If Credit Is Denied 182 Privacy Issues 182 Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act) 183 Conclusion 186 CHAPTER 8 Bank Capital: Capital Adequacy 189 Basel Capital Accords 193 Enterprise Risk Management and Economic Capital 199 Accounting Issues 202 What’s Next? 203 CHAPTER 9 Evaluating Bank Performance 207 Evaluating Publicly Traded Banks 207 Evaluating Commercial Banks 213 Appendix 9A: FDIC Bank Data Guide 227 CHAPTER 10 Payments Systems 229 Money 229 Legal Tender 229 Retail Payments 232 Large-Interbank Payments 241 CHAPTER 11 Other Financial Services 245 Cash Management Services 245 Trust Services, Private Wealth, and Asset Management 248 CHAPTER 12 A Guide to Islamic Banking 255 Islamic Banking, an Alternative Intermediation 255 Special Question on Intermediation by Banks 272 Future Direction 276 CHAPTER 13 The View from the Top: Recommendations from a Superintendent of Banks 279 Tips for Bank Directors 279 Tips for Borrowers 280 Tips for Investors 280 What Lies Ahead 281 Notes 283 Glossary 309 References 335 Index 351

About the Author :
Benton E. Gup holds the Robert Hunt Cochrane/Alabama Bankers Association Chair at the University of Alabama. Dr. Gup is the author or editor of twenty-nine books, and his articles on financial subjects have appeared in leading finance journals. His most recent books are The Valuation Handbook (Wiley) and The Financial and Economic Crises: An International Perspective. In 2009, Dr. Gup was awarded the Midwest Finance Association's Lifetime Achievement Award. Benton E. Gup holds the Robert Hunt Cochrane/Alabama Bankers Association Chair at the University of Alabama. Dr. Gup is the author or editor of twenty-nine books, and his articles on financial subjects have appeared in leading finance journals. His most recent books are The Valuation Handbook (Wiley) and The Financial and Economic Crises: An International Perspective. In 2009, Dr. Gup was awarded the Midwest Finance Association's Lifetime Achievement Award.