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[ 698 ]

I N D E X

government debt xiv, 33 – 6, 112, 182 – 219, 332 – 47, 358 – 9, 462 – 4, 581 – 94

see also operational risk

concepts	111 – 12
Hungary	74 – 85, 209, 291 – 2, 300,

304 – 5

hurdle rates, RAROC 143 – 6

hybrid derivatives 138

IAB see International Accounting Board

IAIS see International Association of Insurance Supervisors

IASB see International Accounting Standards Board

IASC see International Accounting Standards Committee

IBFs see international banking facilities illiquid banks, insolvent banks 408 – 9, 462 IMF see International Monetary Fund imperfect competition 509 – 10, 513 – 17 IMRO see Investment Managers Regulatory

Organisation

in the money options 129 – 33

incentive compatible regulations, concepts 210 – 13

incentive structures, concepts 5 – 7 income

see also proﬁtability interest/non-interest income contrasts

51 – 5, 85 – 6, 102

international comparisons 51 – 5, 73 – 85 independence issues, central banks 35 – 6 India xvi, 67, 209, 289, 292, 300, 317 – 23


background		317 – 23
Basel	317 – 18
bond/equity markets				317 – 23
commercial banks				319 – 23
deposit insurance			321 – 2
employment issues				322
ﬁnancial repression				317 – 23
foreign banks		317 – 23
interest rates		322 – 3
performance issues				317 – 23
reforms	317 – 23
reserve ratios		317 – 18, 322
statistics 317 – 23
structural issues			317 – 23
supervisory problems				322 – 3
Indonesia	323 – 32, 338 – 9, 407, 413,
415 – 36, 464 – 6
background		415 – 36, 464 – 6
crisis responses			424 – 5, 429 – 36, 463 – 6
inﬂation rates		31 – 6, 73, 101, 175 – 6, 215,
231 – 2, 283, 354, 405, 411, 416
see also price-stability. . .
bank failures		405

concepts		31 – 6, 405
emerging markets				290, 314 – 17, 416
EU	283 – 4
interest rates			35, 231 – 2
Japan	448 – 9
information
see also knowledge
asymmetric information						6 – 7, 37 – 8, 42,
	57, 225, 353 – 4
costs	xii, xi – xiv, 2 – 5, 37, 42, 87
economies of scale/scope						3
relationship banking					xviii, 7 – 8
third-party sales				3, 95 – 6
ING 222, 250, 382 – 3, 393
initial margins, derivatives						127
initial public offerings (IPOs)						21 – 2, 55 – 6,
	89, 547 – 64
innovations		62 – 3, 85 – 98, 101, 127 – 8, 133,
	168 – 9, 207 – 8, 290, 484, 492 – 4, 520
see also derivatives; technical progress
inputs
economies of scale/scope						xiii, xvii – xviii, 3,
	26, 62 – 4, 238 – 40, 301, 473 – 539
efﬁciency issues				xvii – xviii, 68, 300 – 1,
	303 – 5, 411, 473 – 539
insider trading 23, 28
insolvency, deﬁnition					104
insolvent banks, illiquid banks 408 – 9, 462
institutional investors					23, 58, 72, 89 – 90
insurance xiv, 3 – 4, 7, 16 – 18, 19, 26, 38,
	41 – 2, 110, 176, 214, 226 – 37, 244,
	247 – 57, 274 – 5, 284 – 6, 355 – 8,
	514 – 16
Insurance Companies Act 1982 228 – 9
interbank markets
concepts		57, 66, 106 – 7, 175 – 6, 181
statistics		66
interest income			51 – 5, 85 – 6, 102, 113 – 18
international comparisons						51 – 5
non-interest income					51 – 5, 85 – 6, 102
statistics		51 – 2
interest rates		xv, 1 – 3, 35, 104, 109, 112 – 72,
	186 – 92, 282 – 4, 314 – 17, 322 – 3,
	404 – 5, 510 – 15
bank failures			404 – 5
demand/supply curves					1 – 3
ECB	282 – 4
inﬂation rates			35, 232

						[	699 ]

							I N D E X
Islamic banking				323 – 32
Japan	448 – 9
movements		xv, 1 – 3, 35, 104, 109,
112 – 72, 404 – 5
Scandinavia 450 – 5
South East Asia				423 – 36
interest-rate derivatives, concepts						42 – 4
interest-rate risk			xv, 104, 109, 112 – 72,
186 – 92
ALM	113 – 18
concepts		xv, 104, 109, 112 – 13, 139,
186 – 92
deﬁnition		109
examples		113 – 18
interest-rate sensitivity, gap analysis						118 – 24
interest-rate swaps, concepts					133 – 42
interference costs, emerging markets							335 – 7
intermediary services
concepts		xii, xi – xiv, 1 – 39, 72, 86 – 7, 89,
92 – 7, 101 – 2, 288, 300, 306, 323 – 5,
353 – 4, 474 – 7
costs	2 – 5, 37, 92 – 7
future prospects				86 – 7, 89, 92 – 7
illustrations		1 – 5
payment systems				9 – 10, 92 – 7, 101 – 2,
474 – 7
risk management				51, 101 – 2
intermediation
Islamic banking				323 – 5
output approaches				476 – 7, 488 – 90
internal models, market risk					187 – 9,
194 – 219
internal ratings based approach (IRB), Basel 2
Accord			193, 195 – 219
International Accounting Board (IAB)							58
International Accounting Standards Board
(IASB)			214 – 18, 234, 299, 474
background		214 – 18, 234 – 5, 299 – 301,
474
IAS-39	218, 474
International Accounting Standards
Committee (IASC)					214 – 18
International Association of Insurance
Supervisors (IAIS)					214 – 18, 285 – 6
international banking
see also global. . .
comparative advantages					65 – 6, 68
concepts		64 – 72, 175 – 6, 179 – 219

[ 700 ]

I N D E X
international banking (continued)
deﬁnitions		64 – 5
international banking facilities (IBFs)				69 – 70
international comparisons
payment systems			9 – 15
structural issues			15 – 18, 221 – 87
international ﬁnancial architecture
concepts		214 – 18
deﬁnition		213
international ﬁnancial markets
see also ﬁnancial markets
concepts		55 – 72, 638 – 40
free trade		56 – 7, 68 – 9, 289
impediments 56 – 7
key markets		56 – 72
reasons	56 – 7, 70 – 1, 638 – 40
International Monetary Fund (IMF)				xvii, 64,
76 – 8, 112, 213 – 18, 237 – 8, 334,
336 – 7, 345 – 51, 407, 422, 424 – 36,
443 – 5, 449 – 50, 463 – 7
background		213 – 18, 334, 336 – 7, 345 – 7,
407, 424 – 36, 443 – 5, 449 – 50,
463 – 7
LLR role		463 – 7
roles	112, 213 – 15, 345 – 7, 424 – 36, 463 – 7

International Organisation of Securities


Commission (IOSCO)				214 – 18,
261 – 3, 285 – 6
international payments systems				65 – 6
international regulations xv – xvi, 173,
179 – 219
see also Basel. . .; regulations
ongoing issues		215 – 18
International Swaps and Derivatives
Association			127
Internet	xiv, 10 – 11, 56, 70, 72 – 3, 86 – 98
see also e-. . .
banks	11, 56, 70, 72 – 3, 92 – 7
concepts	10 – 11, 56, 72 – 3, 86 – 98
future prospects		86 – 98
investment banks			89 – 90
payment statistics			10 – 11, 92 – 7
statistics	10 – 11, 92 – 7
investment banks		xi, xiv, xviii, 17 – 18,
19 – 25, 41, 222 – 42, 244 – 51, 541 – 64,
631 – 52
concepts	19 – 25, 41, 247 – 51, 559 – 61
conﬂicts of interest			20, 22 – 3

deﬁnition	20, 22 – 4, 559 – 61
eurobonds	59
FSA study	22 – 3
Internet	89 – 90
research analysts		20 – 1, 22 – 3, 237 – 9
roles 20, 22 – 4, 41, 247 – 51, 559 – 61
scandals	20 – 1
Investment Managers Regulatory Organisation
(IMRO)		228 – 30
IOSCO see International Organisation of

Securities Commission

IPOs see initial public offerings

Iran	xii, xvi – xvii, 290, 323 – 4, 330 – 2
IRB see internal ratings based approach
Ireland	54, 282 – 4, 482, 490 – 2
Islamic banking			xii, xvi – xvii, 289, 322 – 32
see also individual countries
accounting standards				330
asset-backed transactions					325 – 9
background 322 – 32
basic principles			322 – 9
collateralised securities					325 – 9
equity participation				325 – 6
foreign banks			323 – 4, 327 – 8
global banking			331 – 2
interest rates			323 – 32
intermediation contracts					323 – 7
products		322 – 9
regulations		329 – 32
reserve ratios			327 – 9
risks	329
sovereign risk			332 – 47
statistics		322 – 32
transactions contracts				325 – 9
Israel	413
Italy	18, 25, 35, 51 – 5, 67, 109, 180, 237 – 8,
	268 – 1, 277, 282 – 4, 362 – 3, 395, 482,
	488 – 94, 502 – 8, 526, 528 – 34
iTV	95 – 7
Jamaica 338 – 9
Japan	xiv, xv – xvii, xviii, 1, 8, 13 – 18, 25,
	33 – 4, 51 – 85, 90 – 5, 101 – 7, 140 – 1,
	162, 180, 184 – 5, 205 – 6, 258 – 64,
	275, 285 – 7, 300, 351 – 6, 383 – 6,
	394 – 7, 420, 434 – 50, 568 – 81
bank failures			102, 105, 162, 260 – 2, 353,
	356, 394 – 7, 434 – 50, 459 – 67

Basel	262 – 3
‘Big Bang’ 260 – 3, 285 – 7, 434 – 50,
	467 – 71
central banks		26, 33 – 4, 259 – 64, 434 – 50
credit ratings		206, 443 – 5
crises	407, 412 – 13, 434 – 50, 459 – 67
deposit insurance			262 – 4, 356
e-banking 94 – 5
employment issues			448 – 9
FHCs	25, 261 – 4

Financial Supervisory Agency 34, 440 – 50, 470 – 1

ﬁnancial system (1945 – Mid-1990s) 434 – 7

ﬁnancial system (2003)				444 – 8
ﬁnancial system (late			1980 – 9) 436 – 42
ﬂow problems		444 – 50
foreign banks		259 – 64, 436 – 50
functional segmentation				258 – 62
FX reserves		450
government debt 33, 483 – 4
inﬂation rates		448 – 9
interest rates		448 – 9
international comparisons				13 – 18, 73 – 85
key ﬁnancial centres			59 – 64, 221, 258 – 64
M&As	xviii, 1, 387, 439 – 41, 568 – 81
macroeconomic situation				446 – 50
MNBs	70
Post Ofﬁces		1, 18, 435 – 7, 446 – 7
proﬁtability		51 – 5, 73 – 85
reforms	186 – 7, 260 – 3, 436 – 50,
467 – 71


regulations		221, 237 – 8, 242, 258 – 64,
285	– 7, 356, 394 – 7, 434 – 50, 459 – 67,
569	– 81
relationship banking				8, 258 – 64, 441 – 2,
571	– 81
rescue policies			352, 436 – 50
share prices		83 – 5
statistics		13 – 18, 51 – 5, 60 – 4, 70, 73 – 85,
90, 94 – 5, 258 – 64, 300, 434 – 50, 481,
568	– 81
stock problems			441 – 50
structural issues			221, 258 – 64, 285 – 7, 351,
434	– 50, 459 – 71, 568 – 81
Japan Net Bank (JNB)				94 – 5

JMB see Johnson Matthey Bankers jobbers 22, 227 – 8

					[ 701 ]

					I N D E X
Johnson Matthey Bankers (JMB)					366 – 7,
	394 – 7, 460
joint services, clustering factors					63
joint ventures			71, 422 – 3
JP Morgan		21, 127, 142 – 55, 167 – 8, 175,
	243 – 50
junk bonds		44, 211
Kashima Oil			141
Kaufman’s survey, contagion 355
Kazakhstan			288 – 9, 291, 305
keiretsu	8, 258 – 64, 441 – 2
see also relationship banking
Kidder Peabody				xviii, 98, 564 – 9
Kleinwort-Benson				222, 542
KMV model			162 – 6, 168, 171
knowledge
see also information
concepts			68 – 71
trade attempts				68 – 71
Korea	67, 112, 287, 289 – 90, 300, 407, 413,
	415 – 36, 465, 481
background			415 – 36, 465 – 6, 481
crisis responses				424 – 7, 431 – 6, 465 – 6
M&As		425 – 7
KPMG	140
Kuwait	325 – 7

Lamfalussy reforms, EU 275, 281 – 6, 520 large complex banking organisations (LCBOs)

27 – 8

Latin America xviii, 66, 67 – 9, 266 – 9, 288 – 9, 292 – 3, 335 – 6, 359 – 60, 87 – 94

see also economic cycles

concepts 30 – 6, 37, 90 – 1, 101, 105 – 6, 175 – 9, 215, 404 – 5, 434 – 50, 454 – 5

e-cash 90 – 1
Japan	447 – 50
risk management		101, 105 – 6
main themes xiii – xv
Major Financial Groups Division (MFGD)
	27
Malaysia	xii, 209, 288 – 9, 323 – 4, 330 – 2,
	413, 415 – 36, 465 – 6
management issues
see also risk. . .
compensation		531 – 2


failures	390 – 3
M&As	518 – 38
principal-agent problems 6 – 7, 38, 225,
353 – 6, 531 – 3
styles	640 – 1
X-efﬁciencies 477 – 94
manias	408 – 10
see also crises
marginal costs		487 – 8, 505 – 8
economies of scale 487 – 8
Lerner indices 505 – 6
marked to market approaches, credit risk
166 – 8
market discipline, Basel 2 Accord			194 – 5,
198, 203 – 10
market imperfections, concepts			68 – 71
market makers
concepts		5, 22, 55 – 6, 227 – 30
deﬁnition		55 – 6
market power		11, 68 – 9, 88 – 9, 101, 173 – 4,


	178, 246, 293 – 4, 303 – 4, 478, 495 – 6,
	495 – 514, 519 – 20, 529 – 31
market risk		xv, 102 – 3, 104, 107 – 9, 112 – 72,
	186 – 219, 329, 581 – 94
see also currency risk; interest-rate risk
Basel 2 Accord			194 – 219, 393
Basel Amendment (1996)				186 – 92
concepts		104, 107 – 9, 112 – 13, 124, 141,
	142 – 55, 169 – 71, 186 – 219
deﬁnition		107 – 8, 186 – 7
internal models			187 – 9, 194 – 219
management			142 – 55, 169 – 71,
	186 – 219
RAROC		xv, 103, 142 – 6, 189, 198,
	635 – 44
Riskmetrics		142, 146 – 55, 187 – 9
scenario analysis 154 – 5
stress testing			154 – 5, 203, 204 – 5
types	104, 107 – 8, 186 – 92
VaR	xv, 101 – 3, 142, 146 – 55, 166 – 8,
	187 – 92, 198, 211, 456 – 60, 553 – 5
market risk multipliers (MRMs) 188 – 9
market shares		60 – 1, 495 – 509
market structures
concepts		3, 5
intermediation services				3

market-discipline pillar, Basel 2 Accord 194 – 219

		[ 703 ]

		I N D E X
markets
see also ﬁnancial markets
concepts	55 – 6
Marks & Spencer		97 – 8
Mastercard	11, 89, 98
see also Europay
Matif 127
maturity
concepts	55 – 6, 105 – 6, 108 – 9, 118 – 24,
191 – 2, 197 – 219
gap concepts		119 – 24
matching practices 105 – 6, 108 – 9
maturity ladders, concepts 124 – 5, 185,
191 – 2
Maxwell, Robert		6, 111, 156, 238, 606

MBAs xiii, xxi

MBSs see mortgage-backed securities medium-term ﬁnancial instruments, deﬁnition

55 – 6

memoranda of understanding (MOU) 215, 237, 241, 285 – 6, 460 – 2

merchant banks

concepts xiv, 22 – 3, 27, 67 – 8, 71, 222 – 42, 422, 425

roles 22 – 3

mergers and acquisitions (M&As) xiii, xvii – xviii, 16 – 20, 23, 58 – 9, 96, 98, 174, 251 – 60, 266 – 71, 279 – 1, 311,

440 – 50, 473, 492, 506, 517 – 38, 560, 568 – 81


see also synergies
abnormal returns			521 – 5
announcement effects				520 – 5
background		517 – 38, 560, 568 – 81
case studies		534 – 8
competition		519 – 10, 529 – 31
critique	517 – 38
economies of scale/scope				491 – 2, 517 – 21
efﬁciency issues 492, 517 – 21, 525 – 9
empirical studies			520 – 1
management issues			519 – 38
market power		519 – 20, 529 – 31
performance issues			520, 525 – 9
politics	537 – 8
reasons	519 – 20, 569 – 71
regulations		174
rescues	352 – 8, 425 – 36, 440 – 2
returns	521 – 9

[ 704 ]

I N D E X

mergers and acquisitions (M&As) (continued)


risk	533 – 4
statistics		98, 491 – 2, 517 – 38
stock markets			58 – 9, 537
stock prices			537
synergies		xiii, 484 – 5, 517, 564 – 8
systemic risk			520, 533 – 4
trends	xiii, xvii – xviii, 16 – 17, 58 – 9, 86,
	96, 98, 266 – 71, 473, 491 – 2, 517 – 38
types	517 – 19, 527 – 9
Merrill Lynch			20 – 1, 24, 140, 149 – 50, 175,
	244 – 51
Metallgesellschaft				140 – 1
Mexico	xviii, 69 – 70, 275, 288 – 9, 291, 300,
	336, 338 – 41, 345 – 7, 359 – 60, 413,
	424, 463 – 7, 581 – 94
MFGD see Major Financial Groups Division
microeconomic issues
concepts		xi – xii, 105 – 6, 176 – 219
regulations			176 – 219
Midland Bank			67, 511
migration, concepts				163 – 6

Ministry of Finance (MoF), Japan 258 – 64,

434 – 50, 569 – 82

Mitghmar Egypt Savings Association 323 – 4

mitigants, credit risk	199 – 200
Mitsubishi Tokyo FG	439 – 50

Mitsui Bank 67, 439 – 40, 570 Mizuho Financial Group 439 – 41 MNEs see multinational enterprises

Modern Banking in Theory and Practice (author) xiii

MoF see Ministry of Finance

Moldova	305
Mondex	86
monetary policy 30 – 6, 73, 90 – 1, 175 – 6,
	259 – 64, 307

Monetary Policy Committee, UK 31 – 2, 34, 36, 231 – 2, 283 – 4

monetary-control roles, central banks 30 – 6, 307

money laundering 236, 272 – 3, 299 money markets, deﬁnition 55 – 6, 57 money supply, concepts 30 – 6, 175 – 6 monitoring costs, intermediation 2 – 5,

monitoring roles, ﬁrms 5

monopoly situations				11, 68 – 9, 88 – 9, 101,
173 – 4, 178, 246, 293 – 4, 303 – 4, 478,
495 – 517, 529 – 31
Monte Carlo approach
concepts		148, 171
VaR	148
Moody’s	162, 206, 329 – 30
moral hazard, concepts					7, 38, 66, 177, 241 – 2,
254 – 6, 300, 335 – 7, 396, 433,
461 – 3
Morgan Grenfell			19, 222
Morgan Stanley			21, 175
mortgage corporations					97
mortgage-backed securities (MBSs)
concepts		46 – 51, 97 – 8
statistics		46 – 51
mortgages	16 – 18, 45 – 51, 72, 97, 182 – 3,
195 – 219, 243 – 50, 326 – 7, 367 – 90,
488 – 9, 509 – 16
early-redemption charges						4
MOU see memoranda of understanding
MRMs see market risk multipliers
multilateral netting, concepts						12
multinational banking					xiv – xv, 41, 65 – 72,
179 – 219
see also global. . .
concepts		xiv – xv, 41, 65 – 72, 179 – 219
deﬁnition		67 – 72
emerging markets				72
historical background					67 – 9
paradigm		69
reasons	68 – 72
regulations		68 – 72, 179 – 219
reputational reasons					71 – 2
multinational enterprises (MNEs), deﬁnition
67
Multinet	107
municipal banks, Russia					295 – 8
mutual ﬁrms, bank failures 397 – 8
mutual funds		3 – 4, 5, 41 – 2, 56 – 7, 58 – 9,
199, 322 – 3, 505, 512 – 14
see also unit trusts
mutual-recognition principle, EU							270 – 86
narrow banking activities, concepts							157
narrow money, concepts					31 – 2

NASD see National Association of Securities Dealers


NASDAQ		58 – 9
National Association of Securities Dealers
	(NASD)		20 – 2, 23 – 4, 238,
	250 – 9
National Bank Act 1863, USA						244 – 6
National Bank of India				67
National Mortgage Bank					380
national supervisory arrangements,
	harmonisation issues					215 – 16
National Westminster Bank (NWB)							11,
	28 – 30, 511
Nations Bank		127, 519
negative externalities				174, 353 – 8
net economic value, deﬁnition						117
NetBank	94
Netherlands		13 – 18, 51 – 5, 74 – 85, 90 – 1,
	180, 206, 282 – 4, 482, 490 – 2
netting practices			106 – 7
network money			86 – 97
New Capital Regulation Rules see Basel 2
	Accord
New York Clearing House Association							12
New York Stock Exchange (NYSE) 20 – 2,
	58, 59 – 64, 238
New Zealand		178, 291
Nigeria	366
Nikkei	85, 383 – 6, 437 – 40, 443
non-bank ﬁnancial services					3, 5, 19, 25,
	41 – 99, 454 – 60, 474
concepts		41 – 99, 461 – 70, 474
diversiﬁcation			xi – xii, xiv – xv, 4, 26 – 7,
37 – 8, 41 – 99, 520 – 1
universal banks			19, 25, 41
non-banks 97 – 8, 110, 139, 226, 240 – 2,
	454 – 60
deﬁnition		97
growth issues			97 – 8, 226
non-interest income
concepts		51 – 5, 85 – 6, 102
international comparisons						51 – 5
statistics		51 – 3
non-life insurance			16 – 18
non-parametric method, VaR						147 – 8,
	152 – 3
Nordea	92 – 3
Northern Rock			236
Norway	74 – 85, 209, 237 – 8, 267 – 70, 395,
	413, 449 – 55, 524

[ 705 ]

I N D E X

Norwest 519

note issuance facilities, concepts 138 NWB see National Westminster Bank NYSE see New York Stock Exchange OBS see off-balance sheet activities OECD 64, 68, 73 – 82, 91, 103, 173,

182 – 219, 291, 416 – 18, 517 – 19, 530, 533

off-balance sheet activities (OBS) xiv – xv, xviii, 4, 42, 45 – 54, 72, 89, 97, 102, 113, 124 – 5, 128, 182 – 219, 520

Ofﬁce of Fair Trading (OFT) 11, 232 – 3 Ofﬁce of Thrift Supervision (OTS), USA

247 – 8, 250, 254 offshore centres 64, 180 OFT see Ofﬁce of Fair Trading oil 298, 381, 450 – 5, 463 – 4 OLS see ordinary least squares ombudsmen, UK 234 – 5

OPEC see Organisation of Petroleum Exporting


	Countries
operational risk			xv, 9 – 10, 12, 101, 104,
	110 – 72, 194 – 219, 329
assessments		200 – 2, 208
Basel 2 Accord			194 – 219
concepts		xv, 9 – 10, 12, 101, 104, 110 – 13,
	141, 169 – 71, 194 – 219
deﬁnition		110 – 11, 200 – 1
management			169 – 71, 194 – 219
types	110 – 12, 141, 208
opportunities		xiv – xv, 85 – 98
opportunity costs, Libor				510 – 11
options	xv, 42 – 4, 108, 117 – 18, 126 – 8,
	129 – 33, 138, 149 – 51, 187 – 92, 218,
	636 – 8
see also call. . .; put. . .
concepts		xv, 42 – 4, 108, 117 – 18, 126 – 8,
	129 – 33, 138, 149 – 51, 187 – 92, 218
deﬁnition		129
delta-neutral tactics				141
examples		131 – 3
statistics		42 – 4
terminology			129 – 33
types	129 – 30, 138
Orange County			140, 153

ordinary least squares (OLS) 500 – 6, 510 – 15 Organisation of Petroleum Exporting Countries

(OPEC) 68, 381

[ 706 ]

I N D E X
organisational structures			xi – xii, xi – xiv, 1,
5 – 7, 15 – 39
see also structural issues
command structures		5 – 7
concepts	5 – 7, 15 – 39
international comparisons 15 – 18
statistics	15 – 18
OTC see over the counter derivatives
OTS see Ofﬁce of Thrift Supervision
out of the money options			129 – 33
outputs
see also products
concepts	1 – 5, 473 – 539
deﬁnition	473 – 7
economies of scale/scope			xiii, xvii – xviii, 3,
26, 62 – 4, 238 – 40, 301, 473 – 539
efﬁciency issues xvii – xviii, 68, 300 – 1,
303 – 5, 411, 473 – 539
intermediation approach			476 – 7, 488 – 90
measures	473 – 7, 484 – 5
production approach		474 – 6
stock and ﬂow measures			441 – 50, 474 – 6
value-added measures		474, 532 – 3, 537 – 8
outsourcing arrangements, payment systems

12 – 13

over the counter derivatives (OTC)

concepts	42 – 4, 126 – 33
risks 44
statistics	42 – 4, 127 – 8
overdrafts	474

Overend Gurney xvii, 359 – 60, 408, 414


overview	xi – xix, 1 – 39
P&A see purchase and acquisition
Paine Webber		98
Pakistan	xii, xvi – xvii, 323 – 4, 330 – 2,
	338 – 9, 481
Palmer Rule		1832 459 – 61
panics	408 – 10, 412, 459 – 67

	395 – 6, 453 – 5, 459 – 67, 609 – 11
Gramm Leach Bliley Act (GLB), USA 25,
	242, 248 – 58
Greece	54, 237, 277, 282,
	490 – 2
‘Greeks’	149 – 51
Greenspan, Alan			460
guarantees
Basel 2 Accord			199 – 200
cross-guarantee contracts					212 – 13
Guernsey		64
Halifax	11, 97 – 8, 222 – 42
Hammersmith and Fulham Council						111
harmonisation needs
accounting standards				217 – 18
national supervisory arrangements						215 – 16
HBOS	11, 97 – 8, 222 – 42
HBV	535
hedging	xvii, 42 – 4, 66, 126 – 8, 139 – 42,
	174 – 5, 409, 454 – 66
hedonic cost function, concepts 485
herd instinct, concepts				6, 397, 408 – 9
Herﬁndahl index			498 – 506
Herstatt risk, concepts				106
historic volatility, concepts					145 – 6
Holy Quran xvi – xvii, 323 – 4
Hong Kong		64, 108, 209, 410 – 11
Hong Kong and Shanghai Banking Corporation
	(HSBC)		11, 67, 95 – 8, 218,
	222 – 42, 251 – 2, 285 – 6, 323 – 4,
	327 – 8,
	332
horizontal disallowances, concepts						192

Leeson, Nick	111, 381 – 6, 393 – 4
legal risk
see also operational risk
concepts	111 – 12, 141


lenders of last resort (LLRs) xvii, 33 – 6,
181, 237 – 8, 245 – 6, 285 – 6, 365,
459 – 67
concepts	33 – 6, 181, 237 – 8, 245 – 6,
285 – 6, 365, 459 – 67
debates	459 – 64
IMF 463 – 7
international calls 460, 463 – 7
Lerner indices		505 – 6
less developed countries (LDCs), concepts
287, 416
letters of credit		42, 182 – 3
LGDs see loss given defaults

	Futures Exchange
LINK	11
liquidations
see also failures
concepts		351 – 3
liquidity risk
ALM	124 – 5
concepts		xv, 9 – 10, 104, 105 – 6, 111,
	124 – 5, 141, 329
deﬁnition		105 – 6, 124
liquidity services			xii, xi – xiv, 1, 3 – 39, 66, 72,
	87, 89, 176, 353 – 4, 474
customer requirements 3 – 5
future prospects			87, 89
Lithuania		288 – 9
Lloyds TSB		11, 174, 222 – 42, 511, 535
LLRs see lenders of last resort
loan-growth rates, bank failures 404

distinction	4
emerging markets		333 – 47, 410 – 11,
417 – 36
portfolios	3, 8, 45 – 6, 53, 56 – 7
syndicated loans		4 – 5, 24, 41
local authorities 57, 182 – 3
locational efﬁciency, concepts			68
logit approach	339, 393 – 406
London, key ﬁnancial centres			59 – 64,
221 – 42

230		– 5, 287 – 351, 404, 417 – 36,
441		– 50, 473 – 539, 581 – 94
CLOs 48			– 51
concepts			xiii – xiv, 1 – 39, 87, 103 – 72,
182	– 6, 195 – 219, 404
credit risk			xiv – xv, 102 – 3, 104 – 5,
112	– 13, 128, 135 – 8, 142 – 72,
182	– 219

xvii, 50 – 1, 154 – 5, 174 – 5, 212, 407,
454 – 60, 461, 557
background	454 – 60, 462, 557
objectives	454 – 6
long-term assets, deﬁnition		55 – 6
looting hypothesis 177, 355 – 6, 394
loss given defaults (LGDs)		163 – 6, 197 – 219

Luxembourg 13	– 15, 51 – 5, 74 – 85, 181,
282 – 4, 362 – 3, 395, 482, 490 – 2, 494
M&As see mergers and acquisitions
Maastricht Treaty	1991 35, 282 – 4

paperless credit transfers, statistics		13 – 15
parametric method, VaR 147 – 8
Paribas	391 – 2
pass through securities, concepts		47 – 51
Paycom	11 – 12
payment systems
see also clearing systems

concepts		xiii – xiv, xvi, 9 – 39, 65 – 6,
86 – 97, 101 – 2, 106 – 7, 201 – 19, 474 – 7
future prospects			86 – 7, 87 – 97
intermediary services				9 – 10, 92 – 7, 474 – 7
international comparisons					9 – 15, 65
international payments systems 65 – 6
outsourcing arrangements					12 – 13
regulations		11 – 12
risk management			9 – 10, 101 – 2, 106 – 7,
201 – 19
statistics		9 – 15, 90 – 7
payments risk see settlements risk
PayPal	87 – 90
PaySys	11
PBC see People’s Bank of China
PC banking		92 – 7
PD see probability of default
pegged exchange rates
see also foreign exchange
dangers 410 – 11, 415 – 36, 450 – 5
Penn Square Bank			363 – 5, 374, 616 – 31
pensions	41 – 2, 58, 274 – 7
People’s Bank of China (PBC)					305 – 17
perfect competition			509 – 12
performance issues
see also efﬁciency. . .
concepts		51 – 5, 73 – 85, 96, 416 – 21,
444 – 6, 473 – 539
e-banking comparisons				96
emerging markets			300 – 1, 304 – 51, 416 – 21
international comparisons					51 – 5, 73 – 85,
300 – 1, 304 – 5, 416 – 21, 481
M&As	520, 525 – 9
SCP	xvii – xviii, 494 – 509
share prices		83 – 5
statistics		51 – 5, 73 – 85, 96, 416 – 21,
527 – 9
Personal Investment Authority (PIA)
229 – 30
personal loans
imperfect competition				513 – 15
non-banks		97
Peru 338 – 9
Pfandbrief, Germany			49 – 50
Philadelphia Board of Trade					42
Philippines		413, 416 – 36
physical trades, concepts				56
physical-capital risk

Accord		194 – 5, 198,
203 – 10
PIN numbers	92
Piper Jaffray	21
plastic cards
see also automated teller machines
concepts	9 – 15, 91 – 2, 473 – 4
statistics	9 – 11, 13 – 15
Poland 74 – 85, 300, 302, 304 – 5
political risk
concepts	xv, xvii, xviii, 63, 101, 112,
332 – 47, 587 – 617
deﬁnition	112
emerging markets 332 – 47, 581 – 94
politics, M&As		537 – 8

concepts		3 – 5
Porter, M.		62
portfolio theory (PT), concepts 162 – 6
portfolios		3, 8, 37, 45 – 6, 53, 56 – 8, 148 – 55,
	185 – 6
diversiﬁcation 66 – 7, 185 – 6
emerging markets			332 – 47
loans	3, 8, 45 – 6, 53, 56 – 7
risk	57 – 8, 66 – 7, 148 – 55, 185 – 6
VaR	148 – 55, 456 – 60
Portugal		13 – 15, 51 – 5, 70 – 80, 277, 282 – 4,
	482, 503 – 6, 535
Post Ofﬁces, Japan			1, 18, 435 – 7, 446 – 7
potential credit exposures 163 – 6

210 – 11
prepayment risk, concept	118, 171
price makers, concepts	506 – 8
price risk see market risk

							[	707 ]
							[	707 ]
								I N D E X
price-stability roles, central banks							30 – 6,
	237 – 8, 283 – 5, 459 – 61
prices
RE model		495 – 509
SCP	495 – 509
pricing models, generalised pricing models
	xvii – xviii, 8 – 515
pricing-the-loan method, credit risk								156 – 7
primary instruments, deﬁnition						55 – 6
principal-agent problems, concepts							6 – 7, 38,
	225, 353 – 6, 531 – 3
privatisations		xviii, 112, 184, 265, 292,
	296 – 305, 320, 398, 612 – 13
probability of default (PD)
Basel 2 Accord				197 – 219
emerging markets				290 – 1
probability distributions, RAROC							144 – 6
probit approach			399 – 405
Procter and Gamble				139
product markets, deﬁnition					55 – 6
production approach, output measures								474 – 6
production function				xiii, 475 – 6
productivity issues				xvii – xviii, 473 – 539
see also performance. . .
concepts		473 – 7
deﬁnition		473 – 7
intermediation approach					476 – 7
TFP	474 – 6
products
see also outputs
concepts		1 – 39, 473 – 539
demand/supply curves					1 – 3, 4 – 5
Islamic banking				322 – 9
proﬁt-maximisation				5 – 39, 103 – 6, 478,
	519 – 20, 532 – 3
proﬁtability
see also returns
concepts		5 – 39, 51 – 5, 73 – 85, 96, 103 – 4,
	474 – 6, 495 – 509
e-banking comparisons					96
international comparisons						51 – 5, 73 – 85
statistics		51 – 5, 73 – 85, 96, 476, 496 – 509
supernormal proﬁts 495 – 509
X-efﬁciencies			xvii – xviii, 473, 477 – 94,
	496, 500 – 6, 519 – 20, 525 – 7
ProﬁtCo	633 – 6
proprietary trading				19, 53 – 4, 72, 128,
	139 – 42, 560 – 1, 635 – 7