BANKS AT RISK：GLOBAL BEST PRACTICES IN AN AGE OF TURBULENCE

The crisis revealed a pressing need for better bank governance and risk management along with enhanced supervision and regulation. The Basel III framework—which substantially strengthens bank capital adequacy and introduces liquidity requirements as well as specific supervisory tools to address systemic risk—was a rapid and decisive response, yet much work remains to be done. Beyond the full, timely and consistent global implementation of Basel III, important issues that need to be addressed include systemically important financial institutions, effective cross-border resolution regimes and shadow banking. Banks at Risk provides unique insights into what went wrong and why. More importantly, it contributes to the ongoing debate on how to mitigate the severity and likelihood of future crises.

Jaime Caruana
General Manager, Bank for International Settlements

This is a timely and comprehensive study of risks facing the global banking industry. The book draws on the expertise of top banking experts: commercial bankers, central bankers, regulators and risk experts from China, Japan, the U.S. and other parts of the world to give the reader a comprehensive view of challenges facing the international banking industry. The contributors clearly set out the challenges facing regulators and market participants in this uncertain environment. One of the most valuable characteristics of this book is the sheer scope of the contributors’ vision. They consider every aspect of the global banking system, its risks and possible solutions for ensuring a more stable environment.

Mark Mobius
Executive Chairman, Templeton Asset Management

Among the plethora of offerings in the wake of the global financial crisis, Banks at Risk is a must-read. This collection of contributions provides a thoughtful tour of the lessons from the crisis with perspectives from regulators, practitioners, and risk managers. While the perspectives are varied, the consistency of several themes is compelling: supervision matters more than regulation; risk is more a characteristic of concentration and excessive risk taking than of size; undercapitalization contributed less to the crisis than did poor management; and the importance of returning to basics in areas such as credit culture and understanding of risks. While these themes are at odds with the direction of current international regulatory reforms, they are not easily dismissed. They are presented by an outstanding group of individuals who are associated with institutions and countries that not only survived the crisis, but are widely regarded as among the most successful survivors. Their views are worth heeding.

Jeff Carmichael
Chief Executive Officer, Promontory Financial Group Australasia
Former Chairman, Australian Prudential Regulation Authority

Banks at Risk is a seminal book for clearly understanding the global financial crisis created by the banks and other financial institutions, for describing the lessons we should have learned; and highlighting the levers to transform the system. It is excellent in extracting the insights from the best in our industry. Most impressive are the introductions by Peter Hoflich to the contributed chapters; from the sharp, concise, and accurate overall analysis of the crisis to the detailed, comprehensive, and referenced settings of his various aspects of our business and industry.

Philippe Paillart
Chairman, OneEmpower and LINK Financial
Former board member of Standard Chartered Bank and Group, Ford Financial, DBS Bank and Bank for the Philippine Islands

Peter Hoflich is the managing editor of The Asian Banker. He joined the company in 2003 as a writer and analyst and has contributed to all of the company’s main research and editorial products. He has moderated at industry gatherings and offered commentary on the latest developments in the financial services industry on BBC and CNBC. His first book, Asia’s Banking CEOs was published by John Wiley & Sons in 2008.

Acknowledgments

Introduction

Part One: The Regulators

1. Effective Supervision of Systemically Important Banks
Liu Mingkang

2. Implications of the Financial Crisis for Risk Management and Macroprudential Supervision
Eric S. Rosengren and Joel Werkema

3. Entering an Era of Global Regulatory Oversight
Jane Diplock

4. Old and New Lessons of the Financial Crisis for Risk Management
José María Roldán and Jesús Saurina

Part Two: The Practitioners

5. Observations from the Epicenter
Richard Kovacevich

6. The Financial Crisis: Epicenters and Antipodes
Mike Smith

7. The Trouble With Troubled Banks
Shan Weijian

Part Three: The Risk Managers

8. Global Risk Management in Action
Rob Close

9. The Credit Crisis and Its Implications for Asian Financial Institutions
Tham Ming Soong

10. Missing Viewpoints of Current Global Regulatory Discussions
Tsuyoshi Oyama

Index