The Principles of Banking

Part IV

Bank Strategy and Governance

The final part of this book, excluding Chapter 19 which describes the Wiley website supplementary material referred to in the earlier chapters, is not necessarily more important than any of the other parts, but does describe a subject matter of the greatest influence in a bank's well-being. That is because it is open to the widest interpretation, and requires the most careful judgement in its application.

In Part IV we discuss bank strategy, capital management and corporate governance. Strategy is a nebulous, possibly nefarious concept. But it is important. In chapters 16 and 17 we provide what we consider to be business best practice guidance on how it should be formulated. In Chapter 17 we discuss bank capital and funding management, which we illustrate with a capital policy template. There is also a technical discussion on derivatives collateral funding, which needs to be included in the overall liquidity risk funding policy, and funding strategy.

Chapter 18 looks at corporate governance. This area came under the greatest scrutiny from regulators in the wake of the bank crash, but is another field where it is difficult to enforce standards solely by regulatory fiat. Incompetent senior managers and those exercising poor judgement will always be with us, in every walk of life. Regulators can only do so much to enforce minimum acceptable standards of competence and ability to exercise sound judgement. However, if the overall culture, and consensus, ...