Bank Management and Financial Services

by ROSE

• ISBN13: 9780073046235
• ISBN10: 007304623X
• Additional ISBN(s): 9780073306599
• Edition: 7th
• Format: Hardcover
• Copyright: 2006-10-03
• Publisher: McGraw-Hill/Irwin
• More Book Details
• Purchase Benefits

Table of Contents

Preface	xvii
PART ONE INTRODUCTION TO THE BUSINESS OF BANKING AND FINANCIAL-SERVICES MANAGEMENT	1	(126)
An Overview of Banks and the Financial-Services Sector	3	(28)
Key Topics in This Chapter	3	(1)
Introduction	3	(1)
Powerful Forces Are Reshaping Banking and Financial Services Today	4	(1)
What Is a Bank?	4	(4)
The Financial System and Competing Financial-Service Institutions	8	(4)
Roles of the Financial System	8	(1)
The Competitive Challenge for Banks	8	(1)
Leading Competitors with Banks	8	(4)
Services Banks and Many of Their Closest Competitors Offer the Public	12	(8)
Services Banks Have Offered throughout History	12	(2)
Services Banks and Many of Their Financial-Service Competitors Have Offered More Recently	14	(3)
Dealing in Securities: Offering Security Brokerage and Investment Banking Services	17	(1)
Convenience: The Sum Total of All Banking and Financial Services	18	(2)
Key Trends Affecting All Financial-Service Firms	20	(2)
The Plan of This Book	22	(2)
Summary	24	(1)
Key Terms	25	(1)
Problems and Projects	25	(1)
Internet Exercises	26	(1)
S&P Market Insight Challenge	27	(1)
Real Numbers for Real Banks: The Very First Assignment	28	(1)
Selected References	28	(1)
Appendix: Career Opportunities in Financial Services	29	(2)
The Impact of Government Policy and Regulation on Banking and the Financial-Services Industry	31	(34)
Key Topics in This Chapter	31	(1)
Introduction	31	(1)
Banking Regulation	32	(3)
Pros and Cons of Strict Rules	32	(2)
The Impact of Regulation---The Arguments for Strict Rules versus Lenient Rules	34	(1)
Major Banking Laws---Where and When the Rules Originated	35	(11)
Meet the ``Parents'': The Legislation That Created Today's Bank Regulators	35	(5)
Installing Social Graces and Morals---Social Responsibility Laws	40	(1)
Legislation Aimed at Allowing Interstate Banking: Where Can the ``Kids'' Play?	41	(2)
The Gramm-Leach-Bliley Act (1999): What Are Acceptable Activities for Playtime?	43	(1)
The USA Patriot and Bank Secrecy Acts: Fighting Terrorism and Money Laundering	44	(1)
Telling the Truth and Not Stretching It---The Sarbanes-Oxley Accounting Standards Act (2002)	45	(1)
The 21st Century Ushers In an Array of New Laws, Regulations, and Regulatory Strategies	46	(5)
The Regulation of Nonbank Financial-Service Firms Competing with Banks	51	(2)
Regulating the Thrift (Savings) Industry	51	(1)
Regulating Other Nonbank Financial Firms	52	(1)
Are Regulations Really Necessary in the Financial-Services Sector?	53	(1)
The Central Banking System: Its Impact on the Decisions and Policies of Financial Institutions	53	(6)
Organizational Structure of the Federal Reserve System	54	(1)
The Central Bank's Principal Task: Making and Implementing Monetary Policy	55	(4)
Summary	59	(1)
Key Terms	60	(1)
Problems and Projects	60	(1)
Internet Exercises	61	(1)
S&P Market Insight Challenge	61	(1)
Real Numbers for Real Banks: Assignment for Chapter 2	62	(1)
Selected References	62	(3)
The Organization and Structure of Banking and the Financial-Services Industry	65	(34)
Key Topics in This Chapter	65	(1)
Introduction	65	(1)
The Organization and Structure of the Commercial Banking Industry	66	(2)
Advancing Size and Concentration of Assets	66	(1)
Is a Countertrend Now under Way?	67	(1)
Internal Organization of the Banking Firm	68	(3)
Community Banks and Other Community-Oriented Financial Firms	68	(2)
Larger Banks---Money Center, Wholesale and Retail	70	(1)
Trends in Organization	71	(1)
The Array of Organizational Structures and Types in the Banking Industry	71	(11)
Unit Banking Organizations	73	(1)
Branch Banking Organizations	74	(2)
Electronic Branching---Web Sites and Electronic Networks: An Alternative or a Supplement to Traditional Bank Branch Offices?	76	(2)
Bank Holding Company Organizations	78	(4)
Interstate Banking and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994	82	(1)
Research on Interstate Banking	83	(1)
Two Alternative Types of Banking Organizations Available as the 21st Century Opened: Financial Holding Companies (FHCs) and Bank Subsidiaries	83	(3)
Mergers and Acquisitions Reshaping the Structure and Organization of the Financial-Services Sector	86	(1)
The Changing Organization and Structure of Banking's Principal Competitors	86	(2)
Efficiency and Size: Do Bigger Financial Firms Operate at Lower Cost?	88	(2)
Efficiency in Producing Financial Services	88	(2)
Financial Firm Goals: Their Impact on Operating Cost, Efficiency, and Performance	90	(2)
Summary	92	(1)
Key Terms	93	(1)
Problems and Projects	93	(1)
Internet Exercises	94	(1)
S&P Market Insight Challenge	95	(1)
Real Numbers for Real Banks: Assignment for Chapter 3	95	(1)
Selected References	96	(3)
Establishing New Banks, Branches, ATMs, Telephone Services, and Web Sites	99	(28)
Key Topics in This Chapter	99	(1)
Introduction	99	(1)
Chartering a New (De Novo) Financial-Service Institution	100	(1)
The Bank Chartering Process in the United States	101	(1)
Questions Regulators Usually Ask the Organizers of a New (De Novo) Bank	102	(1)
Factors Weighing on the Decision to Seek a New Charter	103	(1)
Volume and Characteristics of New Bank Charters	104	(1)
How Well Do New Charters Perform?	104	(1)
Establishing Full-Service Branch Offices: Choosing Locations and Designing New Branches	105	(8)
Desirable Sites for New Branches	108	(3)
Branch Regulation	111	(1)
The Changing Role of Financial-Service Branch Offices	111	(1)
In-Store Branching	112	(1)
Establishing and Monitoring Automated Limited-Service Facilities	113	(3)
Point-of-Sale Terminals	113	(1)
Automated Teller Machines (ATMs)	114	(2)
Home and Office Banking	116	(3)
Telephone Banking and Call Centers	117	(1)
Internet Banking	117	(2)
Financial-Service Facilities of the Future	119	(2)
Summary	121	(1)
Key Terms	122	(1)
Problems and Projects	122	(1)
Internet Exercises	123	(1)
S&P Market Insight Challenge	124	(1)
Real Numbers for Real Banks: Assignment for Chapter 4	124	(1)
Selected References	125	(2)
PART TWO FINANCIAL STATEMENTS AND FINANCIAL FIRM PERFORMANCE	127	(78)
The Financial Statements of Banks and Their Principal Competitors	129	(34)
Key Topics in This Chapter	129	(1)
Introduction	129	(1)
An Overview of Balance Sheets and Income Statements	130	(1)
The Balance Sheet (Report of Condition)	130	(14)
The Principal Types of Accounts	130	(11)
Recent Expansion of Off-Balance-Sheet Items in Banking	141	(1)
The Problem of Book-Value Accounting	142	(2)
Auditing: Assuring Reliability of Financial Statements	144	(1)
Components of the Income Statement (Report of Income)	144	(7)
Financial Flows and Stocks	146	(5)
Comparative Income Statement Ratios for Different-Size Financial Firms	151	(1)
The Financial Statements of Leading Nonbank Financial Firms: A Comparison to Bank Statements	151	(1)
An Overview of Key Features of Financial Statements and Their Consequences	152	(1)
Summary	153	(1)
Key Terms	154	(1)
Problems and Projects	154	(4)
Internet Exercises	158	(1)
S&P Market Insight Challenge	159	(1)
Real Numbers for Real Banks: Assignment for Chapter 5	160	(2)
Selected References	162	(1)
Measuring and Evaluating the Performance of Banks and Their Principal Competitors	163	(42)
Key Topics in This Chapter	163	(1)
Introduction	163	(1)
Evaluating Performance	164	(18)
Determining Long-Range Objectives	164	(1)
Maximizing the Value of the Firm: A Key Objective for Nearly All Financial-Service Institutions	164	(2)
Profitability Ratios: A Surrogate for Stock Values	166	(3)
Using Profitability Formulas for Banks and Other Financial-Service Companies	169	(1)
Breaking Down Equity Returns for Closer Analysis	170	(4)
Breakdown Analysis of the Return on Assets	174	(1)
What a Breakdown of Profitability Measures Can Tell Us	175	(1)
Measuring Risk in Banking and Financial Services	176	(6)
Other Goals in Banking and Financial-Services Management	182	(1)
Performance Indicators among Banking's Key Competitors	182	(1)
The Impact of Size on Performance	183	(11)
Size, Location, and Regulatory Bias in Analyzing the Performance of Banks and Competing Financial Institutions	184	(1)
Using Financial Ratios and Other Analytical Tools to Track Bank Performance---The UBPR	185	(9)
Summary	194	(1)
Key Terms	195	(1)
Problems and Projects	195	(5)
Internet Exercises	200	(1)
S&P Market Insight Challenge	200	(1)
Real Numbers for Real Banks: Assignment for Chapter 6	201	(1)
Selected References	202	(1)
Appendix: Improving the Performance of Financial Firms through Knowledge: Sources of Information on the Financial-Services Industry	203	(2)
PART THREE ASSET-LIABILITY MANAGEMENT TECHNIQUES AND HEDGING AGAINST RISK	205	(102)
Asset-Liability Management: Determining and Measuring Interest Rates and Controlling Interest-Sensitive and Duration Gaps	207	(38)
Key Topics in This Chapter	207	(1)
Introduction	207	(1)
Asset-Liability Management Strategies	208	(2)
Asset Management Strategy	208	(1)
Liability Management Strategy	208	(1)
Funds Management Strategy	209	(1)
Interest Rate Risk: One of the Greatest Asset-Liability Management Challenges	210	(5)
Forces Determining Interest Rates	210	(1)
The Measurement of Interest Rates	211	(1)
The Components of Interest Rates	212	(3)
Responses to Interest Rate Risk	215	(1)
One of the Goals of Interest Rate Hedging	215	(11)
Interest-Sensitive Gap Management	216	(10)
Duration Gap Management	226	(1)
The Concept of Duration	226	(2)
Using Duration to Hedge against Interest Rate Risk	228	(7)
The Limitations of Duration Gap Management	235	(1)
Summary	236	(1)
Key Terms	237	(1)
Problems and Projects	237	(3)
Internet Exercises	240	(1)
S&P Market Insight Challenge	241	(1)
Real Numbers for Real Banks: Assignment for Chapter 7	241	(1)
Selected References	242	(3)
Using Financial Futures, Options, Swaps, and Other Hedging Tools in Asset-Liability Management	245	(36)
Key Topics in This Chapter	245	(1)
Introduction	245	(1)
Uses of Derivative Contracts	246	(2)
Financial Futures Contracts: Promises of Future Security Trades at a Set Price	248	(11)
The Short Hedge in Futures	252	(1)
The Long Hedge in Futures	253	(6)
Interest-Rate Options	259	(5)
Regulations and Accounting Rules for Bank Futures and Options Trading	264	(2)
Interest-Rate Swaps	266	(6)
Caps, Floors, and Collars	272	(2)
Interest-Rate Caps	272	(1)
Interest-Rate Floors	272	(1)
Interest-Rate Collars	273	(1)
Summary	274	(1)
Key Terms	274	(1)
Problems and Projects	275	(3)
Internet Exercises	278	(1)
Real Numbers for Real Banks: Assignment for Chapter 8	279	(1)
S&P Market Insight Challenge	280	(1)
Selected References	280	(1)
Risk Management Using Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives	281	(26)
Key Topics in This Chapter	281	(1)
Introduction	281	(1)
Securitizing Loans and Other Assets	282	(8)
The Beginnings of Securitization---The Home Mortgage Market	285	(2)
Examples of Other Assets That Have Been Securitized	287	(2)
The Impact of Securitization upon Lending Institutions	289	(1)
Regulators' Concerns about Securitization	290	(1)
Sales of Loans to Raise Funds and Reduce Risk	290	(3)
Reasons behind Loan Sales	292	(1)
The Risks in Loan Sales	292	(1)
Standby Credit Letters to Reduce the Risk of Nonpayment or Nonperformance	293	(4)
The Structure of SLCs	294	(1)
The Value and Pricing of Standby Letters	294	(1)
Sources of Risk with Standbys	295	(1)
Regulatory Concerns about SLCs	295	(1)
Research Studies on Standbys, Loan Sales, and Securitizations	296	(1)
Credit Derivatives: Contracts for Reducing Credit Risk Exposure on the Balance Sheet	297	(4)
Credit Swaps	297	(1)
Credit Options	298	(1)
Credit Default Swaps (CDSs)	299	(1)
Credit-Linked Notes	300	(1)
Collateralized Debt Obligations (CDOs)	300	(1)
Risks Associated with Credit Derivatives	300	(1)
Summary	301	(1)
Key Terms	302	(1)
Problems and Projects	302	(2)
Internet Exercises	304	(1)
S&P Market Insight Challenge	304	(1)
Real Numbers for Real Banks: Assignment for Chapter 9	305	(1)
Selected References	305	(2)
PART FOUR MANAGING THE INVESTMENT PORTFOLIOS AND LIQUIDITY POSITIONS OF BANKS AND THEIR PRINCIPAL COMPETITORS	307	(78)
The Investment Function in Banking and Financial-Services Management	309	(38)
Key Topics in This Chapter	309	(1)
Introduction	309	(1)
Investment Instruments Available to Financial Firms	310	(1)
Popular Money Market Investment Instruments	311	(4)
Treasury Bills	311	(2)
Short-Term Treasury Notes and Bonds	313	(1)
Federal Agency Securities	313	(1)
Certificates of Deposit	313	(1)
International Eurocurrency Deposits	313	(1)
Bankers' Acceptances	314	(1)
Commercial Paper	314	(1)
Short-Term Municipal Obligations	314	(1)
Popular Capital Market Investment Instruments	315	(1)
Treasury Notes and Bonds	315	(1)
Municipal Notes and Bonds	315	(1)
Corporate Notes and Bonds	315	(1)
Investment Instruments Developed More Recently	316	(2)
Investment Securities Held by Banks	318	(2)
Factors Affecting Choice of Investment Securities	320	(11)
Expected Rate of Return	320	(1)
Tax Exposure	321	(5)
Interest Rate Risk	326	(1)
Credit or Default Risk	326	(2)
Business Risk	328	(1)
Liquidity Risk	328	(1)
Call Risk	328	(1)
Prepayment Risk	328	(2)
Inflation Risk	330	(1)
Pledging Requirements	331	(1)
Investment Maturity Strategies	331	(3)
Maturity Management Tools	334	(4)
The Yield Curve	334	(2)
Duration	336	(2)
Summary	338	(1)
Key Terms	339	(1)
Problems and Projects	339	(2)
Internet Exercises	341	(1)
S&P Market Insight Challenge	342	(1)
Real Numbers for Real Banks: Assignment for Chapter 10	342	(3)
Selected References	345	(2)
Liquidity and Reserve Management: Strategies and Policies	347	(38)
Key Topics in This Chapter	347	(1)
Introduction	347	(1)
The Demand for and Supply of Liquidity	348	(2)
Why Financial Firms Often Face Significant Liquidity Problems	350	(1)
Strategies for Liquidity Managers	351	(3)
Asset Liquidity Management (or Asset Conversion) Strategies	351	(1)
Borrowed Liquidity (Liability) Management Strategies	352	(1)
Balanced Liquidity Management Strategies	353	(1)
Guidelines for Liquidity Managers	354	(1)
Estimating Liquidity Needs	354	(11)
The Sources and Uses of Funds Approach	355	(3)
The Structure of Funds Approach	358	(4)
Liquidity Indicator Approach	362	(2)
The Ultimate Standard for Assessing Liquidity Needs: Signals from the Marketplace	364	(1)
Legal Reserves and Money Position Management	365	(8)
Regulations on Calculating Legal Reserve Requirements	365	(4)
Factors Influencing the Money Position	369	(4)
Factors in Choosing among the Different Sources of Reserves	373	(2)
Central Bank Reserve Requirements around the Globe	375	(1)
Summary	375	(1)
Key Terms	376	(1)
Problems and Projects	376	(5)
Real Numbers for Real Banks: Assignment for Chapter 11	381	(1)
Internet Exercises	382	(1)
S&P Market Insight Challenge	382	(1)
Selected References	382	(3)
PART FIVE MANAGING SOURCES OF FUNDS FOR BANKS AND THEIR PRINCIPAL COMPETITORS	385	(126)
Managing and Pricing Deposit Services	387	(30)
Key Topics in This Chapter	387	(1)
Introduction	387	(1)
Types of Deposits Offered by Banks and Other Depository Institutions	388	(2)
Transaction (Payments or Demand) Deposits	388	(1)
Nontransaction (Savings or Thrift) Deposits	389	(1)
Interest Rates Offered on Different Types of Deposits	390	(6)
The Composition of Deposits	391	(1)
The Ownership of Deposits	392	(1)
The Cost of Different Deposit Accounts	393	(3)
Pricing Deposit-Related Services	396	(1)
Pricing Deposits at Cost Plus Profit Margin	396	(3)
Estimating Deposit Service Costs	397	(1)
An Example of Pooled-Funds Costing	397	(2)
Using Marginal Cost to Set Interest Rates on Deposits	399	(6)
Conditional Pricing	401	(4)
Pricing Based on the Total Customer Relationship and Choosing a Depository	405	(1)
The Role That Pricing and Other Factors Play When Customers Choose a Depository Institution to Hold Their Accounts	405	(1)
Basic (Lifeline) Banking: Key Services for Low-Income Customers	406	(2)
Summary	408	(1)
Key Terms	409	(1)
Problems and Projects	409	(2)
Internet Exercises	411	(1)
Real Numbers for Real Banks: Assignment for Chapter 12	412	(2)
S&P Market Insight Challenge	414	(1)
Selected References	414	(3)
Managing Nondeposit Liabilities and Other Sources of Borrowed Funds	417	(30)
Key Topics in This Chapter	417	(1)
Introduction	417	(1)
Liability Management and the Customer Relationship Doctrine	417	(3)
Alternative Nondeposit Sources of Funds	420	(13)
Federal Funds Market (``Fed Funds'')	420	(3)
Repurchase Agreements as a Source of Funds	423	(2)
Borrowing from the Federal Reserve Bank	425	(2)
Advances from the Federal Home Loan Banks	427	(1)
Development and Sale of Large Negotiable CDs	428	(1)
The Eurocurrency Deposit Market	429	(2)
Commercial Paper Market	431	(1)
Long-Term Nondeposit Funds Sources	431	(2)
Choosing among Alternative Nondeposit Sources	433	(7)
Measuring a Financial Firm's Total Need for Nondeposit Funds: The Available Funds Gap	433	(1)
Nondeposit Funding Sources: Factors to Consider	434	(6)
Summary	440	(1)
Key Terms	441	(1)
Problems and Projects	442	(2)
Internet Exercises	444	(1)
S&P Market Insight Challenge	445	(1)
Real Numbers for Real Banks: Assignment for Chapter 13	445	(1)
Selected References	446	(1)
Investment Banking, Insurance, and Other Sources of Fee Income	447	(28)
Key Topics in This Chapter	447	(1)
Introduction	447	(1)
Sales of Investment Banking Services	448	(5)
Key Investment Banking Services	449	(1)
Linkages between Commercial and Investment Banking	450	(1)
Possible Advantages and Disadvantages of Linking Commercial and Investment Banking	451	(1)
Key Issues for Investment Banks of the Future	452	(1)
Selling Investment Products to Consumers	453	(5)
Mutual Fund Investment Products	454	(1)
Annuity Investment Products	455	(1)
Selling Investment Products	456	(1)
Risks and Rules for Selling Investment Products	457	(1)
Trust Services as a Source of Fee Income	458	(2)
Sales of Insurance-Related Products	460	(2)
Types of Insurance Products Sold Today	460	(1)
Rules Covering Insurance Sales by Federally Insured Depository Institutions	461	(1)
The Alleged Benefits of Financial-Services Diversification	462	(4)
An Example of the Product-Line Diversification Effect Reducing Risk	463	(1)
Potential Economies of Scale and Scope	464	(2)
Information Flows within the Financial Firm	466	(2)
Summary	468	(1)
Key Terms	469	(1)
Problems and Projects	469	(1)
Internet Exercises	470	(1)
S&P Market Insight Challenge	470	(1)
Real Numbers for Real Banks: Assignment for Chapter 14	471	(1)
Selected References	472	(3)
The Management of Capital	475	(36)
Key Topics in This Chapter	475	(1)
Introduction	475	(1)
The Many Tasks Capital Performs	476	(1)
Capital and Risk	477	(2)
Key Risks in Banking and Financial Institutions' Management	477	(1)
Defenses against Risk	478	(1)
Types of Capital in Use	479	(3)
Relative Importance of Different Sources of Capital	479	(3)
One of the Great Issues in the History of Banking: How Much Capital Is Really Needed?	482	(1)
Regulatory Approach to Evaluating Capital Needs	482	(1)
The Basel Agreement on International Capital Standards: A Historic Contract among Leading Nations	483	(13)
Basel I	484	(3)
Capital Requirements Attached to Derivatives	487	(5)
Basel II: A New Capital Accord Unfolding	492	(4)
Changing Capital Standards Inside the United States	496	(2)
Planning to Meet Capital Needs	498	(5)
Raising Capital Internally	498	(2)
Raising Capital Externally	500	(3)
Summary	503	(1)
Key Terms	504	(1)
Problems and Projects	504	(2)
Internet Exercises	506	(1)
S&P Market Insight Challenge	507	(1)
Real Numbers for Real Banks: Assignment for Chapter 15	508	(1)
Selected References	508	(3)
PART SIX PROVIDING LOANS TO BUSINESSES AND CONSUMERS	511	(110)
Lending Policies and Procedures	513	(30)
Key Topics in This Chapter	513	(1)
Introduction	513	(1)
Types of Loans	514	(2)
Factors Determining the Growth and Mix of Loans	515	(1)
Regulation of Lending	516	(4)
Establishing a Written Loan Policy	519	(1)
Steps in the Lending Process	520	(1)
Credit Analysis: What Makes a Good Loan?	521	(7)
Is the Borrower Creditworthy?	522	(3)
Can the Loan Agreement Be Properly Structured and Documented?	525	(1)
Can the Lender Perfect Its Claim against the Borrower's Earnings and Any Assets That May Be Pledged as Collateral?	525	(3)
Sources of Information about Loan Customers	528	(3)
Parts of a Typical Loan Agreement	531	(1)
Loan Review	532	(1)
Handling Problem Loan Situations	533	(2)
Summary	535	(1)
Key Terms	536	(1)
Problems and Projects	536	(2)
Internet Exercises	538	(1)
S&P Market Insight Challenge	539	(1)
Real Numbers for Real Banks: Assignment for Chapter 16	539	(1)
Selected References	540	(3)
Lending to Business Firms and Pricing Business Loans	543	(40)
Key Topics in This Chapter	543	(1)
Introduction	543	(1)
Brief History of Business Lending	544	(1)
Types of Business Loans	544	(1)
Short-Term Loans to Business Firms	544	(4)
Self-Liquidating Inventory Loans	544	(1)
Working Capital Loans	545	(1)
Interim Construction Financing	545	(1)
Security Dealer Financing	546	(1)
Retailer and Equipment Financing	546	(1)
Asset-Based Financing	547	(1)
Syndicated Loans (SNCs)	547	(1)
Long-Term Loans to Business Firms	548	(2)
Term Business Loans	548	(1)
Revolving Credit Financing	548	(2)
Long-Term Project Loans	550	(1)
Loans to Support the Acquisition of Other Business Firms	550	(1)
Analyzing Business Loan Applications	550	(2)
Analysis of a Business Borrower's Financial Statements	551	(1)
Financial Ratio Analysis of a Customer's Financial Statements	552	(7)
The Business Customer's Control over Expenses	554	(1)
Operating Efficiency: Measure of a Business Firm's Performance Effectiveness	554	(1)
Marketability of the Customer's Product or Service	555	(1)
Coverage Ratios: Measuring the Adequacy of Earnings	556	(1)
Liquidity Indicators for Business Customers	557	(1)
Profitability Indicators	558	(1)
The Financial Leverage Factor as a Barometer of a Business Firm's Capital Structure	558	(1)
Comparing a Business Customer's Performance to the Performance of Its Industry	559	(3)
Contingent Liabilities	560	(2)
Preparing Statements of Cash Flows from Business Financial Statements	562	(6)
Pro Forma Statements of Cash Flows and Balance Sheets	564	(2)
The Loan Officer's Responsibility to the Lending Institution and the Customer	566	(2)
Pricing Business Loans	568	(7)
The Cost-Plus Loan Pricing Method	569	(1)
The Price Leadership Model	569	(2)
Below-Prime Market Pricing	571	(1)
Customer Profitability Analysis (CPA)	572	(3)
Summary	575	(1)
Key Terms	576	(1)
Problems and Projects	576	(4)
Internet Exercises	580	(1)
S&P Market Insight Challenge	581	(1)
Real Numbers for Real Banks: Assignment for Chapter 17	581	(1)
Selected References	582	(1)
Consumer Loans, Credit Cards, and Real Estate Lending	583	(38)
Key Topics in This Chapter	583	(1)
Introduction	583	(1)
Types of Loans Granted to Individuals and Families	584	(3)
Residential Loans	584	(1)
Nonresidential Loans	585	(1)
Credit Card Loans and Revolving Credit	585	(1)
New Credit Card Regulations	586	(1)
Debit Cards: A Partial Substitute for Credit Cards?	586	(1)
Rapid Consumer Loan Growth	587	(1)
Characteristics of Consumer Loans	587	(1)
Evaluating a Consumer Loan Application	588	(2)
Example of a Consumer Loan Application	590	(4)
Credit Scoring Consumer Loan Applications	594	(3)
The FICO Scoring System	596	(1)
Laws and Regulations Applying to Consumer Loans	597	(4)
Customer Disclosure Requirements	598	(1)
Outlawing Credit Discrimination	599	(1)
Predatory Lending and Subprime Loans	600	(1)
Real Estate Loans	601	(4)
Differences between Real Estate Loans and Other Loans	601	(1)
Factors in Evaluating Applications for Real Estate Loans	602	(1)
Home Equity Lending	603	(2)
The Most Controversial of Home Mortgage Loans: Interest-Only Mortgages	605	(1)
The Changing Environment for Consumer and Real Estate Lending	605	(1)
A New Federal Bankruptcy Code Appears	606	(1)
Pricing Consumer and Real Estate Loans: Determining the Rate of Interest and Other Loan Terms	607	(5)
The Interest Rate Attached to Nonresidential Consumer Loans	607	(3)
Interest Rates on Home Mortgage Loans	610	(2)
Summary	612	(1)
Key Terms	613	(1)
Problems and Projects	614	(3)
Internet Exercises	617	(1)
S&P Market Insight Challenge	617	(1)
Real Numbers for Real Banks: Assignment for Chapter 18	618	(1)
Selected References	619	(2)
PART SEVEN MANAGING THE FUTURE IN A GLOBAL MARKETPLACE	621	(58)
Acquisitions and Mergers in Financial-Services Management	623	(26)
Key Topics in This Chapter	623	(1)
Introduction	623	(1)
Mergers on the Rise	624	(2)
The Motives behind the Rapid Growth of Financial-Service Mergers	626	(4)
Selecting a Suitable Merger Partner	630	(2)
The Merger and Acquisition Route to Growth	632	(1)
Methods of Consummating Merger Transactions	633	(2)
Regulatory Rules for Bank Mergers in the United States	635	(3)
Justice Department Guidelines	636	(2)
The Merger Decision-Making Process by U.S. Federal Regulators	638	(1)
Merger Rules in Europe	638	(1)
Making a Success of a Merger	638	(2)
Research Findings on the Impact of Financial-Service Mergers	640	(3)
The Financial and Economic Impact of Acquisitions and Mergers	641	(1)
Public Benefits from Mergers and Acquisitions	642	(1)
Summary	643	(1)
Key Terms	644	(1)
Problems and Projects	644	(1)
Internet Exercises	645	(1)
S&P Market Insight Challenge	646	(1)
Real Numbers for Real Banks: Assignment for Chapter 19	646	(1)
Selected References	647	(2)
International Banking and the Future of Banking and Financial Services	649	(30)
Key Topics in This Chapter	649	(1)
Introduction	649	(1)
Types of International Banking Organizations	650	(2)
Regulation of International Banking	652	(3)
Goals of International Banking Regulation	652	(1)
U.S. Banks' Activities Abroad	653	(1)
Expansion and Regulation of Foreign Bank Activity in the United States	653	(1)
New Capital Regulations for Major Banks Worldwide	654	(1)
Services Supplied by Banks in International Markets	655	(10)
Making Foreign Currencies Available to Customers	655	(1)
Hedging against Foreign Currency Risk Exposure	656	(3)
Other Tools for Reducing Currency Risk	659	(1)
Supplying Customers with Short- and Long-Term Credit or Credit Guarantees	660	(2)
Supplying Payments and Thrift (Savings) Instruments to International Customers	662	(1)
Underwriting Customer Note and Bond Issues in the Eurobond Market	663	(1)
Protecting Customers against Interest Rate Risk	663	(1)
Helping Customers Market Their Products through Export Trading Companies	664	(1)
Challenges for International Banks in Foreign Markets	665	(5)
Growing Customer Use of Securities Markets to Raise Funds	665	(1)
Developing Better Methods for Assessing Risk in International Lending	665	(4)
Adjusting to New Market Opportunities Created by Deregulation and New International Agreements	669	(1)
The Future of Banking and Financial Services	670	(4)
Summary	674	(1)
Key Terms	675	(1)
Problems and Projects	675	(1)
Internet Exercises	676	(1)
S&P Market Insight Challenge	677	(1)
Real Numbers for Real Banks: Assignment for Chapter 20	677	(1)
Selected References	677	(2)
Dictionary of Banking and Financial-Service Terms	679	(16)
Index	695