The Future of Finance: A New Model for Banking and Investment

ISBN-13: 9780470572290 / Angielski / Twarda / 2010 / 224 str.

Moorad Choudhry; Gino Landuyt; Cfa Frank J. Fabozzi

Opis

New banking and investment business models to navigate the post-financial crisis environment The financial crisis of 2007-2008 has discredited business models in the banking and fund management industries. In The Future of Finance, Moorad Choudhry and Gino Landuyt argue that banks must realign their business models, implying a lower return-on-equity; diversifying their funding sources; and increasing liquidity reserves. On the investment side, the authors discuss how diversification did not reduce risk, but rather amplified it, and failed to stabilize returns. The authors conclude that the clear lesson from the crisis is to know one's risk. A lesson that is best served by concentrating on assets and sectors that you understand.

• Examines the weaknesses in the business models of many institutions, as well as the theoretical foundation for professionals in the field of finance
• Identifies the shortcomings of Modern Portfolio Theory
• Addresses how investment managers can find new strategies for creating "alpha" and why they need to re-vamp their fee structures

Filled with in-depth insights and practical advice, The Future of Finance will provide bankers and investment managers with a guide to realigning their businesses in order to prosper in the post-crisis financial markets.

Spis treści

Foreword.

Preface.

Introduction.

Market Instability.

Derivatives and Mathematical Modeling.

Senior Management and Staying in the Game .

Macro–prudential Financial Regulation and Cycle–Proof Regulation.

The Way Forward.

Conclusion.

Part I: A Review of the Financial Crash.

Chapter 1: Globalization, Emerging Markets, and the Savings Glut.

Globalization.

A Series of Emerging Market Crises.

Low Yield Environment Due to New Players on the Financial Markets.

Artificially Low Exchange Rates.

Recommendations and Solutions for Global Imbalances.

Chapter 2: The Rise of Derivatives and Systemic Risk.

Systemic Risk.

Derivative Market Systemic Risk: Solutions for Improvement.

Chapter 3: The Too–Big–To–Fail Bank, Moral Hazard, and Macroprudential Regulation.

Banks and Moral Hazard.

Addressing Too–Big–to Fail: Mitigating Moral Hazard Risk.

Macroprudential Regulation: Regulating Bank Systemic Risk.

Conclusion.

Chapter 4: Corporate Governance and Remuneration in the Banking Industry.

Bonuses and a Moral Dilemma.

A Distorted Remuneration Model.

Unsuitable Personal Behavior.

Conclusion.

Chapter 5: Bank Capital Safeguards: Additional Capital Buffers and Reverse Convertibles.

Capital Issues in a Bear Market.

Looking for New Capital Instruments.

Counter–Cyclical Capital Management.

Chapter 6: Economic Theories under Attack.

A Belief in Free and Self Adjusting Markets.

Modigliani and Miller.

Markowitz and Diversification Tested.

Minsky Once Again.

Lessons to Be Learned for Central Banks.

Conclusion.

Part II: New Models for Banking and Investment.

Chapter 7: Long–Term Sustainable Investment Guidelines.

The Investment Landscape after the Crisis.

Government Debts and Demographics.

A New Economic Environment.

The Inflation Dragon.

Currencies and a Changing Geo–Political Landscape.

Exchange Traded Funds: A Flexible Asset Class.

Conclusion.

Chapter 8: Bank Asset–Liability and Liquidity Risk Management.

Basic Concepts of Bank Asset–Liability Management.

Asset and Liability Management: The ALCO.

ALCO Reporting.

Principles of Bank Liquidity Risk Management.

Measuring Bank Liquidity Risk: Key Metrics.

Internal Funding Rate Policy.

Conclusion.

Chapter 9: A Sustainable Bank Business Model: Capital, Liquidity and Leverage.

The New Bank Business Model.

Corporate Governance.

Liquidity Risk Management.

The Liquid Asset Buffer.

Conclusion.

Notes.

References.

About the Authors.

Index.

O autorze

Moorad Choudhry has over twenty–one years experience in investment banking and was latterly head of treasury at Europe Arab Bank. He was previously head of treasury at KBC Financial Products and vice president in structured finance services at JPMorgan Chase Bank. Dr. Choudhry is Visiting Professor at the Department of Economics, London Metropolitan University, and Senior Research Fellow at the ICMA Centre, University of Reading. He is a Fellow of the IFS–School of Finance and a Fellow of the Chartered Institute for Securities and Investment. He is on the Editorial Board of the Journal of Structured Finance and the Editorial Advisory Board of American Securitization.

Gino Landuyt is Head of Sales at Conduit Capital in London. Prior to that, he was head of insti–tutional structured sales at ING Bank in Brussels, and worked with KBC Bank N.V. in their Brussels, Frankfurt, New York, and London offices. Landuyt has an MA in applied economic sciences from the State University of Antwerp and an MBA from the Catholic University of Antwerp.

Blurb

Praise for The Future of Finance

"Choudhry and Landuyt give us highly relevant and readable advice on running a financial investment business in the post–crisis world. Discipline, practical knowledge of the asset class, and risk management have come to the fore!"
Darrell Duffie, Dean Witter Distinguished Professor of Finance, Graduate School of Business, Stanford University

"Once again, the prolific Moorad Choudhry has delivered a thorough, highly readable, and thought–provoking study. The Future of Finance reviews the financial crisis, but unlike other books on the subject, the emphasis here is less on explaining the past and more on examining how the financial world may evolve."
David Wileman, Chief Executive, King & Shaxson

"Moorad, in his exemplary style, provides fresh insights into the recent financial crisis and what it teaches the world. Whilst diving deep into the basics of economics and banking, he overturns some of the classic beliefs. The beauty of this book is the simplicity in which it presents the underlying reasons, the certainty of its conclusions, and the practicality of its recommendations at a macro as well as micro level. It′s a must–read for all those with interest in economics, banking, treasury, and ALM."
Abhijit Patharkar, Senior Business Manager, Asset & Liability Management, Standard Chartered Bank

"Moorad Choudhry and Gino Landuyt bring a unique combination of experience and insight to this work. Few other seasoned bankers have the motivation or talent to write such an eloquent and thoughtful appraisal of the banking crisis, or the intelligence to provide such wise, high–level recommendations for the future of finance. This book should be read by all policymakers, regulators, finance directors, chief risk offers, treasurers, and investment managers."
Professor Carol Alexander, Chair of Risk Management, ICMA Centre, University of Reading