Commercial and Investment Banking and the International Credit and Capital Markets : A Guide to the Global Industry and Its Governance in the New Age of Uncertainty

by Scott-Quinn, Brian

• ISBN13: 9780230370470
• ISBN10: 0230370470
• Format: Hardcover
• Copyright: 2012-09-04
• Publisher: Palgrave Macmillan

Summary

Written by a former practitioner, this book fills a clear gap in the current literature for a practice-focused text that brings together the organizational structure, economics and governance of the finance industry investment banking, wholesale banking and asset management - with the functions it performs such as mergers and acquisitions, IPOs, private equity, hedge funds, high frequency trading and the structuring of cash and synthetic ETFs and CDOs. It integrates the credit and capital markets by considering securitization as a "conversion" process between the two markets and money market mutual funds as a capital market alternative to bank deposits offered in the credit market. It analyzes the societal value of the industry as well as market and regulatory failure leading to crisis and hence the need for more appropriate governance structures and disciplining and control mechanisms for both banks and sovereign groupings such as the eurozone.

Author Biography

PROFESSOR BRIAN SCOTT-QUINN is chairman of the ICMA Center for financial markets at Henley Business School, UK, & Director of Banking and Insurance Programs. He worked in the fields of investment banking, trading, asset management, and stock broking prior to founding the ICMA Center as a specialist university finance school. His career in the City of London started as a trainee with the merchant bank, Hill Samuel. He then became a fixed income analyst with Kidder Peabody Securities Ltd. Along with three others he was a founder of Ross and Partners Securities Ltd - a privately owned international bond trading house. After negotiating the sale of Ross & Partners to Drexel Burnham Inc. he became finance director of Drexel Burnham Lambert Securities Ltd responsible for funding and risk management. He then moved to Security Pacific Bank (now part of Bank of America Merrill Lynch), a Californian bank with an office in London. Initially a portfolio strategist he subsequently became strategy advisor to the Group CEO, working on issues relating to the commercial bank, the securities trading operation and the stock broker Hoare Govett. In 1995 the International Capital Market Association voted to allocate £3 million from their capital account to constructing a purpose-designed building to house the new ICMA center. ICMA has since donated a further £5 million to the university which enabled the construction of a second facility that includes someone hundred Thompson Reuters terminals with associated trading, valuation and asset management software. He was director of the Center from the time he founded it until 2006 when he took up the newly created post of Chairman. Today, the ICMA Center is one of the largest university finance schools in Europe and is part of the triple-accredited (AMBA, EQUIS and AACSB) Henley Business School, the UK's oldest business school which is home to some 7,000 students from over 140 countries from Africa to Asia, South America to Europe.

His main areas of consulting, executive education and research are: strategy in the financial services industry, banking, wealth and asset management and trading systems. He has been a consultant to, amongst others, Westpac Bank, NM Rothschild, Canada Life Insurance, Australian Mutual Provident (AMP), Investec Bank, the London Stock Exchange and SWX Europe (the Swiss exchange). He was a member of the Financial Services Authority (FSA) industry working group on Secondary Bond Market Transparency. He has been a consultant to the US Treasury and to a central bank and in 1978/9 was a monetary policy advisor to Mrs. Thatcher's first Chancellor of the Exchequer (finance minister), Lord Howe of Aberavon (Sir Geoffrey Howe). He is also a director of the holding company for LendLoanInvest.co.uk, a peer to peer social lending website.

Table of Contents

Preface
Overview of the Structure of this Book
Table of Contents

SECTION I
Financing the Economy - The Role of Banks, Shadow Banks, Primary and Secondary Capital Markets and the Risk Management of Asset Portfolios
PART I: THE FUNDAMENTALS OF FINANCE, MARKETS AND THE FINANCIAL SERVICES INDUSTRY
The Three Pillars of Finance and Capital Markets
Appendix - Valuation Models
Balance Sheets: The Key to Understanding Financial Intermediation
Financial Intermediation: Industry Sectors, Products and Markets
Financial Intermediation: Commercial and Investment Bank Structure
PART II: PRIMARY MARKETS: FUNDING LIQUIDITY AND CAPITAL ALLOCATION THROUGH CREDIT AND CAPITAL MARKETS
Liquidity: What is it?
Financing Companies, Households and Governments through Credit and Capital Markets
Credit Intermediation: Depository Institutions: Banks
Bank Liquidity Management
Securitization as a Financing Tool
Credit Market Intermediation: Non-Depository Institutions and Markets - The Shadow Banking System
IPOs and Corporate Bond Origination
PART III: SECONDARY MARKETS: MARKET LIQUIDITY AND PRICE SIGNALS FOR CAPITAL ALLOCATION IN THE PRIMARY MARKET
Market Liquidity: Order-driven Auction Markets and Quote-driven Dealer Markets
The New Secondary Market Structure: Competition, Dark Polls, Algorithmic and High Frequency Trading
Clearing and Settlement of Securities Transactions
PART IV: MANAGING ASSET RISK IN INVESTMENT PORTFOLIOS
Investment Management and Portfolio Structuring
Investment Management Practice: Funds - Pension, Insurance, Sovereign Wealth, Long-Only, Hedge, Mutual, Cash and Synthetic ETF's and Delta One Trading Desks, UCITS

SECTION II
Governance and Market Failure: Companies, Banks and Sovereigns - Control, Discipline, Risk Management, Regulation, Strategy and Fiscal Sustainability
PART V: INTERNAL CAPITAL ALLOCATION: THE ROLE OF DIRECTORS, INVESTORS AND THE MARKET FOR CORPORATE CONTROL
The Internal Capital Market & Investor Governance of Capital Allocation
The Market for Corporate Control: Mergers and Acquisitions
Private Equity
PART VI: CAPITAL MARKET FAILURE, FINANCIAL INSTITUTION FAILURE, REGULATORY FAILURE, SOVEREIGN STATE GOVERNANCE FAILURE, SOVEREIGN DEFAULT AND FINANCIAL CRISES
Market Failure: Sub-Optimal Allocation of Resources by Credit and Capital Markets: Financial and Sovereign Debt Crises
Bank Default: Illiquidity, Insolvency, Valuation, Resolution, Sovereign Default: Bailing-in the Private Sector and Collective Action
Case Study: Greece in Default in 2011
Case Study: Italy, Illiquid or Insolvent in 2011
Risk Management in Credit Intermediaries and Investment Banks
Regulation of Banks and Investment Banks: Basel I, II and III
Regulation of Securities Markets
PART VII: THE ROLE OF GOVERNANCE AND STRATEGY IN RESOURCE ALLOCATION, FIRM AND INDUSTRY STRUCTURE: CASE STUDIES IN FINANCIAL SERVICES
Strategy, Governance and Firm and Industry Structure
Case Studies in Financial Services
The Future Structure of the Industry