The Principles of Banking, 2nd Edition

PART IVBank Strategy and Governance

Part IV of the book is not necessarily more important than any of the other parts but it 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 15 and 16 we provide what we consider to be business best-practice guidance on how it should be formulated. In Chapter 16 we discuss bank capital and funding management, which we illustrate with a capital policy template (available on the companion website).

Chapter 17 looks at corporate governance. This area came under great scrutiny from regulators in the wake of the bank crash, and much of the governance framework we observe in banks today is dictated 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, for strategy and management in banking changes to one of an inherent conservatism, this will result in a more sustainable business model. In this final chapter we provide recommendations on how to implement business best-practice corporate governance. ...