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This book aims to provide the reader with an overview of the main elements of analysing bank and sovereign risk. This book gives a good understanding of the importance of bank and sovereign risk in international business and banking and credit assessment.
The book covers:
Bank Risk Analysis: The first module is a systematic approach to analysing banks including the macroeconomic and industry and regulatory factors that will affect all banks in any particular country or region. It also addresses the specific elements of individual bank analysis often referred to as the CAMELS approach, which looks at the individual strengths and weaknesses of banks in terms of capitalization levels, asset quality, management, earnings performance, liquidity and funding, and sensitivity to market risk. It covers financial ratio analysis, trend and peer analysis, accounting and country comparisons. It will also look at the methodologies of the ratings agencies, the causes of recurrent banking crises, and the causes and warning signs of individual bank failures. Understanding and assessing risk has become a major issue for bankers, regulators, depositors and investors. Its importance will continue to grow due to the severity of the global financial crisis that commenced in 2008 and makes it even more important to understand the risks involved in dealing with bank counterparties.
Sovereign Risk Analysis: This module looks at how to analyse the risk of sovereign countries failing to meet their financial obligations on time and in full. It examines the causes and incidents of sovereign defaults and the implications for doing business in any particular country. It assesses the key economic drivers of sovereign strength or weakness in terms of government policy and growth, diversity of economic activity, government debt and budget balance levels, bank lending and money supply, foreign exchange regimes, depth of capital markets and currency vulnerability. It also examines the key political governance and demographic issues that have significant impact on sovereign strength and viability. Although sovereign defaults and restructurings happen relatively rarely, the effects are enormous when they do. This module also looks at the relationship with state owned and government related entities and the financial system and how they can impact sovereign risk and be affected by it. Read each chapter carefully, and test your understanding by completing the various questions and exercises which follow.
What are the key benefits of this book?