Banking and Country Risk Analysis: Workbook

This series aims to provide the reader with an overview of the main elements of analyzing bank and country risk, examining specialized sectors such as bank risk, financial analysis, bank qualitative analysis, bank ratings criteria, country risk analysis, and country risk models. When you have completed the workbook, you should have a good understanding of the importance of bank and country risk in international banking. You should be well prepared for other, more in-depth studies on bank and country risk, country risk assessment and management. The subject of bank and country risk, understanding it and assessing it, quantitatively and qualitatively, has attained an importance for bankers, regulators and investors that has increased dramatically over recent years and will continue to do so for the foreseeable future. Bank mergers, resulting in larger banks (and thus increased risk concentration) further stimulates the need to understand the risks inherent in these entities, their operating environment and management culture, and the risks involved in dealing with them as trading counterparties. What has driven this and what will continue to do so? Problems of country defaults, deregulation of financial markets, increased competition within local and across international boundaries, mergers and megamergers, and the failure of major banks on an unprecedented scale threatening to destabilize the global economy have been the main catalysts for this increased need to know.

Table of Contents:
Part 1 Bank qualitative risk analysis: what do banks do?; different types of banks and their revenue structures; banking system and industry risks; primary causes of bank failure; the analytical framework; how the rating agencies analyze bank risk; managing bank limits; the regulatory framework; the risk management function; sources of information. Part 2 Bank financial risk analysis: the analytical framework; financial statement analysis; spreadsheet analysis; bankscope spreadsheet analysis; financial ratio analysis; bank peer group analysis; local versus international accounting standards; creative accounting and ratio manipulation; risk profile of investment banks; financial analysis of investment banks. Part 3 Country risk analysis: country risk assessment; leading economic indicators of some countries; political risk; regulations concerning country risk; external country risk assessments; country classification system and limits framework; portfolio approach to country risk. Part 4 Country risk modelling: building a country risk model; how to make comparisons between indicators?; the link between a credit score and a country limit; short and medium term models; early warning signals; a model bank model; the development of ratings; sovereign ratings.