Bank Management and Financial Services with Standard and Poor's Educational Version of Market Insight and Ethics in Finance Powerweb

by Rose, Peter S.; Hudgins, Sylvia Conway

• ISBN13: 9780072975376
• ISBN10: 0072975377
• Edition: 6th
• Format: Hardcover
• Copyright: 2004-02-27
• Publisher: McGraw-Hill/Irwin

Summary

The banking industry affects the welfare of every other industry and the economy. Banks are the leaders of the financial-services industry as a whole, however, financial-service competitors are now challenging them more than ever before. Bank Management and Financial Services is designed to help students master established management principles and to confront the perplexing issues of risk, regulation, technology, and competition that bankers and other financial-service managers see as their greatest challenges for the future.

Table of Contents

Preface	xvii
PART ONE INTRODUCTION TO THE BUSINESS OF BANKING AND FINANCIAL-SERVICES MANAGEMENT	1	(192)
An Overview of Banks and the Financial-Services Sector	3	(32)
Key Topics in This Chapter	3	(1)
Introduction	3	(1)
Powerful Forces Are Reshaping the Banking Industry Today	4	(1)
What Is a Bank?	4	(4)
The Financial System and Competing Financial-Service Institutions	8	(4)
Services Banks and Many of Their Closest Competitors Offer the Public	12	(8)
Services Banks Have Offered throughout History	13	(3)
Services Banks and Many of Their Financial-Service Competitors Have Developed More Recently	16	(2)
Dealing in Securities: Offering Security Brokerage and Security Underwriting Services	18	(1)
Convenience: The Sum Total of All Banking and Financial Services	19	(1)
Key Trends Affecting Banks and Other Financial-Service Firms	20	(3)
Are Traditional Banks Dead?	23	(2)
The Plan of This Book	25	(2)
Summary	27	(1)
Key Terms	28	(1)
Problems and Projects	28	(1)
Internet Exercises	29	(1)
S&P Market Insight Challenge	30	(1)
Real Numbers for Real Banks: The Very First Assignment	31	(1)
Selected References	31	(1)
Appendix: Career Opportunities in Banking and Financial Services	32	(3)
The Impact of Government Policy and Regulation on Banking and the Financial-Services Industry	35	(36)
Key Topics in This Chapter	35	(1)
Introduction	35	(1)
Banking Regulation	36	(1)
Bank Regulation---Pros and Cons of Strict Rules	36	(4)
The Impact of Regulation on Banks---The Arguments for Strict Rules versus Lenient Rules	38	(2)
Major Banking Laws---Where and When the Rules Originated	40	(14)
Meet the Parents: The Legislation That Created Today's Bank Regulators	41	(4)
Instilling Social Graces and Morals---Social Responsibility Laws of the 1960s, 1970s, 1980s, and 1990s	45	(1)
Legislation Aimed at Allowing Interstate Banking: Where Can the ``Kids'' Play?	46	(1)
The Gramm-Leach-Bliley Act (1999): What Are Acceptable Activities for Playtime?	47	(2)
Tattling on the Bullies---The USA Patriot Act (2001)	49	(1)
Telling the Truth and Not Stretching It---The Sarbanes-Oxley Accounting Standards Act (2002)	50	(1)
Deregulation and the Key Issues Left Unresolved by Recent Legislation and Regulation	50	(4)
The Regulation of Nonbank Financial-Service Firms Competing with Banks	54	(3)
Regulating the Thrift (Savings) Industry	54	(2)
Are Regulations Really Necessary in the Financial-Services Sector?	56	(1)
The Central Banking System: Its Impact on the Decisions and Policies of Banks and Their Financial-Service Competitors	57	(7)
Organizational Structure of the Federal Reserve System	58	(1)
The Central Bank's Principal Task: Making and Implementing Monetary Policy	59	(5)
Summary	64	(1)
Key Terms	65	(1)
Problems and Projects	65	(1)
Internet Exercises	66	(1)
S&P Market Insight Challenge	66	(1)
Real Numbers for Real Banks: Assignment for Chapter 2	67	(1)
Selected References	68	(3)
The Organization and Structure of Banking and the Financial-Services Industry	71	(34)
Key Topics in This Chapter	71	(1)
Introduction	71	(1)
The Organization and Structure of the Commercial Banking Industry	72	(5)
Internal Organization of the Banking Firm	72	(4)
Recent Trends in Bank Organization	76	(1)
The Array of Corporate Organizational Structures in Banking	77	(11)
Getting a New Charter of Incorporation	77	(1)
Unit Banking Organizations	78	(1)
Branch Banking Organizations	79	(4)
Electronic Branching---Websites and Electronic Networks: An Alternative or a Supplement to Traditional Bank Branch Offices?	83	(1)
Bank Holding Company Organizations	84	(4)
Interstate Banking and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994	88	(3)
Two Alternative Types of Banking Organizations Available as the 21st Century Opened	91	(1)
The Changing Organization and Structure of Banking's Principal Competitors	92	(1)
Efficiency and Size: Do Bigger Financial Firms Operate at Lower Cost?	93	(2)
Efficiency in Producing Financial Services	93	(2)
Banking and Financial Firm Goals: Their Impact on Operating Cost, Efficiency, and Performance	95	(2)
Summary	97	(2)
Key Terms	99	(1)
Problems and Projects	99	(1)
Internet Exercises	100	(1)
S&P Market Insight Challenge	100	(1)
Real Numbers for Real Banks: Assignment for Chapter 3	101	(1)
Selected References	102	(3)
The Financial Statements of Banks and Some of Their Closest Competitors	105	(40)
Key Topics in This Chapter	105	(1)
Introduction	105	(1)
An Overview of Bank Balance Sheets and Income Statements	106	(1)
The Bank's Balance Sheet (Report of Condition)	107	(16)
The Principal Types of Accounts	107	(11)
Recent Expansion of Off-Balance-Sheet Items in Banking	118	(2)
The Problem of Book-Value Accounting in Banking	120	(3)
Components of the Income Statement (Report of Income)	123	(6)
Financial Flows and Stocks	125	(4)
Comparative Income Statement Ratios for Banks of Different Sizes	129	(1)
Other Useful Bank Financial Statements	129	(2)
The Funds-Flow Statement (Sources and Uses of Funds Statement)	129	(1)
Statement of Stockholders' Equity	130	(1)
The Financial Statements of Leading Nonbank Financial Firms: A Comparison to Bank Statements	131	(1)
An Overview of Key Features of Financial Statements and Their Consequences	132	(1)
Summary	132	(2)
Key Terms	134	(1)
Problems and Projects	134	(5)
Internet Exercises	139	(2)
S&P Market Insight Challenge	141	(1)
Real Numbers for Real Banks: Assignment for Chapter 4	142	(2)
Selected References	144	(1)
Measuring and Evaluating the Performance of Banks and Their Principal Competitors	145	(48)
Key Topics in This Chapter	145	(1)
Evaluating a Bank's Performance	146	(20)
Determining the Bank's Long-Range Objectives	146	(1)
Maximizing the Value of the Firm: A Key Objective for Nearly All Financial-Service Institutions	147	(2)
Profitability Ratios: A Surrogate for Stock Values	149	(3)
Useful Profitability Formulas for Banks and Other Financial-Service Companies	152	(1)
Breaking Down Equity Returns for Closer Analysis	153	(4)
Breakdown Analysis of the Return on Assets	157	(3)
What a Breakdown of Profitability Measures Can Tell Us	160	(1)
Measuring Risk in Banking and Financial Services	160	(5)
Other Forms of Risk in Banking and Financial Services	165	(1)
Other Goals in Banking and Financial-Services Management	166	(1)
Performance Indicators among Banking's Key Competitors	166	(1)
The Impact of Size on Performance	167	(14)
Size, Location, and Regulatory Bias in Analyzing the Performance of Banks and Competing Financial Institutions	169	(1)
Using Financial Ratios and Other Analytical Tools to Track Bank Performance---The UBPR	170	(11)
Summary	181	(1)
Key Terms	181	(1)
Problems and Projects	181	(5)
Internet Exercises	186	(1)
S&P Market Insight Challenge	186	(1)
Real Numbers for Real Banks: Assignment for Chapter 5	187	(3)
Selected References	190	(1)
Appendix: Improving the Performance of Banks and Other Financial Firms through Knowledge: Sources of Information on the Banking and Financial-Services Industry	191	(2)
PART TWO ASSET-LIABILITY MANAGEMENT TECHNIQUES AND HEDGING AGAINST INTEREST RATE AND CREDIT RISK	193	(112)
Asset-Liability Management: Determining and Measuring Interest Rates and Controlling Interest-Sensitive and Duration Gaps	195	(40)
Key Topics in This Chapter	195	(1)
Introduction	195	(2)
Asset-Liability Management Strategies	197	(1)
Asset Management Strategy	197	(1)
Liability Management Strategy	197	(1)
Funds Management Strategy	197	(1)
Interest Rate Risk: One of the Greatest Asset-Liability Management Challenges	198	(6)
Forces Determining Interest Rates	198	(1)
The Measurement of Interest Rates	199	(2)
The Components of Interest Rates	201	(2)
The Response of Banks and Other Financial Firms to Interest Rate Risk	203	(1)
One of the Goals of Interest Rate Hedging	204	(11)
Interest-Sensitive Gap Management	205	(10)
Duration Gap Management	215	(1)
The Concept of Duration	215	(3)
Using Duration to Hedge against Interest Rate Risk	218	(7)
The Limitations of Duration Gap Management	225	(1)
Summary	226	(1)
Key Terms	227	(1)
Problems and Projects	227	(3)
Real Numbers for Real Banks: Assignment for Chapter 6	230	(1)
Internet Exercises	231	(1)
S&P Market Insight Challenge	232	(1)
Selected References	232	(3)
Using Financial Futures, Options, Swaps, and Other Hedging Tools in Asset-Liability Management	235	(40)
Key Topics in This Chapter	235	(1)
Introduction	235	(1)
Commercial Banks' Use of Derivative Contracts	236	(2)
Financial Futures Contracts: Promises of Future Security Trades at a Set Price	238	(13)
The Short Hedge in Futures	244	(1)
The Long Hedge in Futures	244	(7)
Interest-Rate Options	251	(5)
Regulations and Accounting Rules for Bank Futures and Options Trading	256	(2)
Interest-Rate Swaps	258	(7)
Caps, Floors, and Collars	265	(2)
Interest-Rate Floors	265	(1)
Interest-Rate Collars	266	(1)
Summary	267	(1)
Key Terms	268	(1)
Problems and Projects	268	(3)
Internet Exercises	271	(1)
Real Numbers for Real Banks: Assignment for Chapter 7	272	(1)
S&P Market Insight Challenge	273	(1)
Selected References	273	(2)
Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives: Important Risk-Management Tools for Banks and Competing Financial-Service Firms	275	(30)
Key Topics in This Chapter	275	(1)
Introduction	275	(2)
Securitizing Bank Loans and Other Assets	277	(7)
The Beginnings of Securitization---The Home Mortgage Market	279	(3)
Examples of Other Assets That Have Been Securitized	282	(1)
The Impact of Securitization on Banks and Other Lending Institutions	283	(1)
Sales of Loans to Raise Funds	284	(4)
Reasons behind Loan Sales	285	(1)
The Risks in Loan Sales	286	(2)
Standby Credit Letters	288	(4)
The Structure of Standby Letters of Credit (SLCs)	289	(1)
The Value and Pricing of Standby Letters	289	(1)
Sources of Risk with Standby Credits	290	(1)
Regulatory Concerns about Standby Credit Arrangements	290	(1)
Research Studies on Standbys, Loan Sales, and Securitizations	291	(1)
Credit Derivatives: Contracts for Reducing Credit Risk Exposure on the Balance Sheet	292	(5)
Credit Swaps	292	(1)
Credit Options	293	(1)
Credit Default Swaps	294	(1)
Credit-Linked Notes	295	(1)
Collateralized Debt Obligations (CDOs)	296	(1)
Risks Associated with Credit Derivatives	296	(1)
Summary	297	(1)
Key Terms	298	(1)
Problems and Projects	298	(2)
Internet Exercises	300	(1)
S&P Market Insight Challenge	300	(1)
Real Numbers for Real Banks: Assignment for Chapter 8	301	(1)
Selected References	302	(3)
PART THREE MANAGING THE INVESTMENT PORTFOLIOS AND LIQUIDITY POSITIONS OF BANKS AND SIMILAR FINANCIAL FIRMS	305	(82)
The Investment Function in Banking and Financial Services Management	307	(40)
Key Topics in This Chapter	307	(1)
Introduction	307	(1)
Investment Instruments Available to Banks and Other Financial Firms	308	(3)
Popular Money Market Investment Instruments	311	(2)
Treasury Bills	311	(1)
Short-Term Treasury Notes and Bonds	311	(1)
Federal Agency Securities	311	(1)
Certificates of Deposit	312	(1)
International Eurocurrency Deposits	312	(1)
Bankers'Acceptances	312	(1)
Commercial Paper	313	(1)
Short-Term Municipal Obligations	313	(1)
Popular Capital Market Investment Instruments	313	(2)
Treasury Notes and Bonds	313	(1)
Municipal Notes and Bonds	314	(1)
Corporate Notes and Bonds	314	(1)
Other Investment Instruments Developed More Recently	315	(2)
Investment Securities Actually Held by Banks	317	(2)
Factors Affecting Choice of Investment Securities	319	(13)
Expected Rate of Return	320	(1)
Tax Exposure	320	(5)
Interest-Rate Risk	325	(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	332	(2)
Maturity Management Tools	334	(4)
The Yield Curve	334	(2)
Duration	336	(2)
Summary	338	(1)
Key Terms	339	(1)
Problems and Projects	340	(2)
Internet Exercises	342	(1)
S&P Market Insight Challenge	342	(1)
Real Numbers for Real Banks: Assignment for Chapter 9	343	(3)
Selected References	346	(1)
Liquidity and Reserve Management: Strategies and Policies	347	(40)
Key Topics in This Chapter	347	(1)
Introduction	347	(1)
The Demand for and Supply of Liquidity	348	(3)
Why Banks and Many of Their Closest Competitors Face Significant Liquidity Problems	351	(1)
Strategies for Liquidity Managers	352	(3)
Asset Liquidity Management (or Asset Conversion) Strategies	352	(1)
Borrowed Liquidity (Liability) Management Strategies	353	(1)
Balanced (Asset and Liability) Liquidity Management Strategies	354	(1)
Guidelines for Liquidity Managers	355	(1)
Estimating Liquidity Needs	355	(20)
The Sources and Uses of Funds Approach	356	(3)
The Structure of Funds Approach	359	(4)
Liquidity Indicator Approach	363	(2)
The Ultimate Standard for Assessing Liquidity Needs: Signals from the Marketplace	365	(1)
Legal Reserves and Money Position Management	366	(1)
Regulations on Calculating Legal Reserve Requirements	367	(3)
Factors Influencing the Money Position	370	(5)
Factors in Choosing among the Different Sources of Reserves	375	(1)
Central Bank Reserve Requirements beyond U.S. Borders	376	(1)
Summary	377	(1)
Key Terms	378	(1)
Problems and Projects	378	(5)
Internet Exercises	383	(1)
S&P Market Insight Challenge	383	(1)
Real Numbers for Real Banks: Assignment for Chapter 10	384	(1)
Selected References	385	(2)
PART FOUR MANAGING THE SOURCES OF FUNDS FOR BANKS AND THEIR CLOSEST COMPETITORS	387	(134)
Managing and Pricing Deposit Services	389	(34)
Key Topics in This Chapter	389	(1)
Introduction	389	(1)
Types of Deposits Offered by Banks and Other Depository Institutions	390	(4)
Transaction (Payments) Deposits	391	(1)
Nontransaction (Savings or Thrift) Deposits	392	(2)
Interest Rates Offered on Different Types of Deposits	394	(6)
The Composition of Bank Deposits	394	(2)
The Functional Cost Analysis of Different Deposit Accounts	396	(4)
Pricing Deposit-Related Services	400	(1)
Pricing Deposits at Cost Plus Profit Margin	400	(4)
Estimating Average Deposit Service Costs	401	(1)
An Example of Pooled-Funds Costing	402	(2)
Using Marginal Cost to Set Interest Rates on Deposits	404	(6)
Conditional Pricing	406	(4)
Pricing Deposits Based on the Total Customer Relationship	410	(2)
The Role That Deposit Pricing and Other Factors Play When Customers Choose a Bank or Thrift Institution to Hold Their Deposit Accounts	410	(2)
Basic (Lifeline) Banking: Key Services for Low-Income Customers	412	(2)
Summary	414	(1)
Key Terms	415	(1)
Problems and Projects	416	(2)
Internet Exercises	418	(1)
S&P Market Insight Challenge	418	(1)
Real Numbers for Real Banks: Assignment for Chapter 11	419	(2)
Selected References	421	(2)
Managing Nondeposit Liabilities and Other Sources of Borrowed Funds	423	(34)
Key Topics in This Chapter	423	(1)
Introduction	423	(1)
Liability Management and the Customer Relationship Doctrine	423	(3)
Alternative Nondeposit Sources of Funds	426	(15)
Federal Funds Market	427	(3)
Repurchase Agreements as a Source of Bank Funds	430	(2)
Borrowing from the Federal Reserve Bank in the District	432	(2)
Advances from the Federal Home Loan Banks	434	(1)
Development and Sale of Large Negotiable CDs	435	(2)
Eurocurrency Deposit Market	437	(1)
Commercial Paper Market	438	(1)
Long-Term Nondeposit Funds Sources	439	(2)
Choosing among Alternative Nondeposit Sources	441	(8)
Measuring a Financial Firm's Total Need for Nondeposit Funds: The Funds Gap	441	(1)
Nondeposit Funding Sources: Factors to Consider	442	(7)
Summary	449	(1)
Key Terms	450	(1)
Problems and Projects	450	(2)
Internet Exercises	452	(1)
S&P Market Insight Challenge	453	(1)
Real Numbers for Real Banks: Assignment for Chapter 12	454	(1)
Selected References	454	(3)
Sources of Fee Income: Investment Banking, Security Trading, Insurance, Trust, and Other Revenue-Producing Services	457	(26)
Key Topics in This Chapter	457	(1)
Introduction	457	(2)
Sales of Investment Banking Services	459	(2)
Selling Investment Products to Consumers	461	(6)
Trust Services as a Source of Fee Income	467	(2)
Sale of Insurance-Related Products	469	(2)
Types of Insurance Products Sold by Banks and Other Financial-Service Providers in Recent Years	469	(1)
New Rules Covering Insurance Sales by FDIC-Insured Depository Institutions	469	(2)
The Alleged Benefits of Financial-Services Diversification	471	(3)
An Example of the Product-Line Diversification Effect	471	(3)
Potential Economies of Scope	474	(1)
Nondeposit Services and Information Flows within the Banking or Financial Firm	474	(2)
Summary	476	(1)
Key Terms	477	(1)
Problems and Projects	477	(1)
Internet Exercises	478	(1)
S&P Market Insight Challenge	478	(1)
Real Numbers for Real Banks: Assignment for Chapter 13	479	(1)
Selected References	480	(3)
The Management of Capital	483	(38)
Key Topics in This Chapter	483	(1)
Introduction	483	(1)
The Many Tasks Capital Performs	484	(1)
Capital and Risk	485	(3)
Key Risks in Banking and Financial Institutions' Management	485	(2)
Defenses against Risk	487	(1)
Types of Capital	488	(2)
Relative Importance of the Different Sources of Capital	488	(2)
One of the Great Issues in the History of Banking: How Much Capital Is Really Needed?	490	(2)
Regulatory Approach to Evaluating Capital Needs	491	(1)
The Basel Agreement on International Bank Capital Standards: An Historic Contract among Leading Nations	492	(13)
Capital Requirements Attached to Derivatives	496	(6)
Basel II: A New Capital Accord Unfolding	502	(3)
Changing Capital Standards inside the United States	505	(2)
Planning to Meet Capital Needs	507	(5)
Raising Capital Internally	507	(2)
Raising Capital Externally	509	(3)
Summary	512	(1)
Key Terms	513	(1)
Problems and Projects	513	(3)
Internet Exercises	516	(1)
S&P Market Insight Challenge	517	(1)
Real Numbers for Real Banks: Assignment for Chapter 14	518	(1)
Selected References	519	(2)
PART FIVE PROVIDING LOANS TO BUSINESSES AND CONSUMERS	521	(122)
Lending Policies and Procedures	523	(32)
Key Topics in This Chapter	523	(1)
Introduction	523	(1)
Types of Loans	524	(3)
Factors Determining the Growth and Mix of Loans	525	(2)
Regulation of Lending	527	(4)
Establishing a Written Loan Policy	530	(1)
Steps in the Lending Process	531	(2)
Credit Analysis: What Makes a Good Loan?	533	(7)
Is the Borrower Creditworthy?	533	(4)
Can the Loan Agreement Be Properly Structured and Documented?	537	(1)
Can the Lender Perfect Its Claim against the Borrower's Earnings and Any Assets That May be Pledged as Collateral?	537	(3)
Sources of Information about Loan Customers	540	(3)
Parts of a Typical Loan Agreement	543	(1)
Loan Review	544	(1)
Handling Problem Loan Situations	545	(2)
Summary	547	(1)
Key Terms	548	(1)
Problems and Projects	548	(3)
Internet Exercises	551	(1)
S&P Market Insight Challenge	551	(1)
Real Numbers for Real Banks: Assignment for Chapter 15	552	(1)
Selected References	553	(2)
Lending to Business Firms and Pricing Business Loans	555	(46)
Key Topics in This Chapter	555	(1)
Introduction	555	(1)
Types of Business Loans	556	(1)
Short-Term Loans to Business Firms	556	(4)
Self-Liquidating Inventory Loans	556	(1)
Working Capital Loans	557	(1)
Interim Construction Financing	558	(1)
Security Dealer Financing	558	(1)
Retailer and Equipment Financing	558	(1)
Asset-Based Financing	559	(1)
Syndicated Loans	559	(1)
Long-Term Loans to Business Firms	560	(3)
Term Business Loans	560	(1)
Revolving Credit Financing	561	(1)
Long-Term Project Loans	562	(1)
Loans to Support Acquisitions of Other Business Firms	562	(1)
Analyzing Business Loan Applications	563	(3)
Analysis of a Business Borrower's Financial Statements	563	(3)
Financial Ratio Analysis of a Customer's Financial Statements	566	(8)
The Business Customer's Control over Expenses	566	(1)
Operating Efficiency: Measure of a Business Firm's Performance Effectiveness	567	(1)
Marketability of the Customer's Product or Service	568	(1)
Coverage Ratios: Measuring the Adequacy of Earnings	569	(1)
Liquidity Indicators for Business Customers	570	(1)
Profitability Indicators	571	(1)
The Financial Leverage Factor as a Barometer of a Business Firm's Capital Structure	572	(2)
Comparing a Business Customer's Performance to the Performance of Its Industry	574	(2)
Contingent Liabilities	575	(1)
Preparing Statements of Cash Flows from Business Financial Statements	576	(7)
Pro Forma Statements of Cash Flows and Balance Sheets	579	(2)
The Loan Officer's Responsibility to the Lending Institution and the Customer	581	(2)
Pricing Business Loans	583	(1)
The Cost-Plus Loan Pricing Method	583	(1)
The Price Leadership Model	584	(7)
Below-Prime Market Pricing	587	(1)
Customer Profitability Analysis	588	(3)
Summary	591	(1)
Key Terms	592	(1)
Problems and Projects	592	(4)
Internet Exercises	596	(1)
S&P Market Insight Challenge	597	(1)
Real Numbers for Real Banks: Assignment for Chapter 16	598	(1)
Selected References	598	(3)
Consumer Loans, Credit Cards, and Real Estate Lending	601	(42)
Key Topics in This Chapter	601	(1)
Introduction	601	(1)
Types of Loans Granted to Individuals and Families	602	(4)
Residential Mortgage Loans	602	(1)
Nonresidential Loans	603	(1)
Credit Card Loans and Revolving Credit	603	(2)
New Credit Card Regulations	605	(1)
Debit Cards: A Partial Substitute for Credit Cards?	605	(1)
Characteristics of Consumer Loans	606	(1)
Evaluating a Consumer Loan Application	607	(2)
Example of a Consumer Loan Application	609	(4)
Credit Scoring Consumer Loan Applications	613	(4)
The FICO Scoring System	616	(1)
Laws and Regulations Applying to Consumer Loans	617	(4)
Customer Disclosure Requirements	617	(1)
Outlawing Credit Discrimination	618	(2)
Predatory Lending and Subprime Loans	620	(1)
Real Estate Loans	621	(4)
Differences between Real Estate Loans and Other Loans	622	(1)
Factors in Evaluating Applications for Real Estate Loans	622	(1)
Home Equity Lending	623	(2)
The Changing Environment for Consumer and Real Estate Lending	625	(1)
Pricing Consumer and Real Estate Loans: Determining the Rate of Interest and Other Loan Terms	626	(8)
The Interest Rate Attached to Nonresidential Consumer Loans	626	(4)
Use of Variable Rates on Consumer Loans	630	(2)
Interest Rates on Home Mortgage Loans	632	(2)
Home Mortgage Refinancings and the Impact of Record Low Loan Rates	634	(1)
Summary	634	(1)
Key Terms	635	(1)
Problems and Projects	636	(3)
Internet Exercises	639	(1)
S&P Market Insight Challenge	639	(1)
Real Numbers for Real Banks: Assignment for Chapter 17	640	(1)
Selected References	641	(2)
PART SIX THE PATH OF EXPANSION FOR BANKS AND COMPETING FINANCIAL-SERVICE PROVIDERS	643	(94)
Creating and Managing Service Outlets: New Charters, Branches, and Electronic Facilities	645	(30)
Key Topics in This Chapter	645	(1)
Introduction	645	(2)
Chartering a New Bank or Other Financial-Service Institution	647	(1)
The Bank Chartering Process in the United States	647	(1)
Questions Regulators Usually Ask the Organizers of a New Bank	648	(2)
Factors Weighing on the Decision to Seek a New Bank Charter	650	(1)
Volume and Characteristics of New Bank Charters	651	(1)
How Well Do New Banks Perform?	652	(1)
Establishing Full-Service Branch Offices: Choosing Locations and Designing New Branches	653	(7)
Desirable Sites for New Branches	654	(4)
Branch Regulation	658	(1)
The Changing Role of Branches	658	(1)
In-Store Branching	659	(1)
Establishing and Monitoring Limited-Service Facilities	660	(6)
Financial-Service Facilities of the Future	666	(2)
Summary	668	(1)
Key Terms	669	(1)
Problems and Projects	669	(1)
Internet Exercises	670	(1)
S&P Market Insight Challenge	671	(1)
Real Numbers for Real Banks: Assignment for Chapter 18	672	(1)
Selected References	672	(3)
Mergers and Acquisitions: Managing the Process	675	(30)
Key Topics in This Chapter	675	(1)
Introduction	675	(1)
Mergers on the Rise	676	(2)
The Motives behind the Rapid Growth of Banking and Financial-Service Mergers	678	(4)
Selecting a Suitable Merger Partner	682	(3)
The Merger and Acquisition Route to Growth	685	(1)
Methods of Consummating Merger Transactions	686	(1)
Regulatory Rules for Bank Mergers in the United States	687	(4)
Justice Department Guidelines	688	(2)
The Merger Decision-Making Process by U.S. Federal Regulators	690	(1)
Merger Rules in Europe	691	(1)
Making a Success of a Merger	692	(2)
Research Findings	694	(2)
The Financial Impact	694	(1)
The Public Benefits	695	(1)
Summary	696	(2)
Key Terms	698	(1)
Problems and Projects	698	(2)
Internet Exercises	700	(1)
S&P Market Insight Challenge	700	(1)
Real Numbers for Real Banks: Assignment for Chapter 19	701	(1)
Selected References	701	(4)
International Banking Service Options	705	(32)
Key Topics in This Chapter	705	(1)
Introduction	705	(2)
Types of Foreign Banking Organizations	707	(2)
Regulation of International Banking	709	(3)
Goals of International Banking Regulation	709	(1)
Expansion and Regulation of Foreign Bank Activity in the United States	709	(2)
New Capital Regulations for Major Banks Worldwide	711	(1)
Customer Services Supplied by Banks in International Markets	712	(11)
Making Foreign Currencies Available for Customer and Proprietary Transactions	712	(1)
Hedging against Foreign Currency Risk Exposure	713	(4)
Other Tools for Reducing Currency Risk	717	(2)
Supplying Customers with Short- and Long-Term Credit or Credit Guarantees	719	(2)
Supplying Payments and Thrift (Savings) Instruments to International Customers	721	(1)
Underwriting Customer Note and Bond Issues in the Eurobond Market	721	(1)
Protecting Customers against Interest-Rate Risk	722	(1)
Helping Customers Market Their Products through Export Trading Companies	722	(1)
Future Problems for International Banks	723	(7)
Growing Customer Use of Securities Markets to Raise Funds	723	(1)
Developing Better Methods for Assessing Risk in International Lending	724	(4)
Adjusting to New Market Opportunities Created by Deregulation and New International Agreements	728	(2)
Summary	730	(1)
Key Terms	731	(1)
Problems and Projects	732	(1)
Internet Exercises	733	(1)
S&P Market Insight Challenge	733	(1)
Real Numbers for Real Banks: Assignment for Chapter 20	734	(1)
Selected References	734	(3)
Appendix: Using a Financial Calculator	737	(6)
Dictionary of Banking and Financial-Service Terms	743	(16)
Index	759