PREFACE TO THE SECOND EDITION
“Caesar [To The Soothsayer]: The Ides of March Have Come
Soothsayer: Aye, Caesar, but not gone”
[William Shakespeare, ‘Julius Caesar’, Act III, Scene I]
The winds of change have indeed swept the banking and financial services landscape since the first edition of this book…and how! The financial crisis of 2007 has raised searching questions about almost every basic tenet of modern bank management. And like the ‘ides of March’, the aftermath of the turmoil has ‘not gone’…not completely.
Banks, regulators, governments, and the entire global financial system are still finding ways to deal with the aftershocks of the crisis, and to avert new ones in future.
What's New in This Edition?
The 2007 financial crisis has thrown ‘risk management’ into sharp relief. The second edition has a new introductory chapter that deals with the future of the banking industry in the wake of the global financial crisis, discusses how the Indian banking system is organized, and the challenges facing financial stability. It also has a new chapter on advanced topics on ‘credit risk management’ that discusses various models of credit risk measurement and management. Though credit risk and other mathematical/ statistical models have drawn their share of the flak during the crisis, the banking industry cannot do without them, and indeed, they have assumed more relevance in the present context. A new chapter on ‘High-tech Banking’ that also deals with security issues, and another on ‘Mutual Funds’ have also been included.
How the Book Has Been Reorganized
With risk management in sharp focus, the book is reorganized to enable the modern banker, academician, or student to recognize risks in banking and financial services, and take decisions to achieve the most favorable risk-return tradeoffs.
The book is divided into 2 major sections – ‘Management of banks’ and ‘Management of financial services’.
Chapter 1 is an introduction to the changing dynamics of one of the most regulated industries in the world. Chapters 2 to 12 examine the different facets of managerial aspects of banking – the big picture of the monetary policy and what it means, analyzing banks’ financial statements, banks’ sources of funds, how banks use the funds for lending and investment, and the risks associated with the activities that banks undertake. The remaining chapters – 13 to 22 – deal with management of financial services that banks offer.
- All chapters have been substantially updated and revised. Some chapters have been added or completely rewritten to make them contemporary. Regulations and other applications have been updated up to December 2009 (in some cases, up to February 2010).
- Three new chapters have been added to address contemporary issues in the industry.
- More case studies and live examples have been provided in most chapters.
- Additional problems have been added to most chapters to provide students the opportunity to work with data and circumstances that would help them understand basic concepts better.
- Web references have been given for further research work by academics.
- More topics have been included for possible research by interested students.
- A notable feature of this book is that the topics presented in this book would be found in advanced textbooks on banking and finance. However, the explanations and illustrations are aimed at those who have a basic knowledge of both banking and financial concepts. Most concepts are explained in simple terms with the aid of diagrams, figures, and simple worked-out examples. The technical details/ advanced concepts related to each chapter are provided in annexures.
In short, there is a lot that is contemporary and new in this edition. But it is also interesting to note that the section on ‘Basic Concepts’ (presented as Section I of each chapter) has not undergone much change. This means that basic tenets and objectives of the banking and financial services industry do not change much, as do the applications of the basic concepts and their evolution to suit the environment in which they operate.