Banking: An Introduction

Banking: An Introduction

Prof. Dr AP Faure
Rhodes University

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Description

This book presents an introduction to private sector banking (as opposed to central banking). Banks are at the very centre of the financial system. They act as intermediaries between all the four sectors of the economy) and all other financial intermediaries. They are also at the very centre of the money market, the market for short-term debt and deposits, marketable and non-marketable, and the interbank markets. They also create the all-important payments system. The banks are unique in that they are able to create new money (by new bank lending), and this is so because money is whatever is generally accepted as the means of payments / medium of exchange: bank deposits (notes and coins make up a minor part of the money stock). Because of this, and other reasons (moral hazard, for example) banks are also inherently unstable, and require robust regulation and supervision. Also because of this, banks are the target of monetary policy implementation.
Content

    Essence of banking
        Learning outcomes
        Introduction
        The financial system
        Principles of banking
        The balance sheet of a bank
        Bibliography
    Money creation
        Learning objectives
        Introduction
        What is money?
        Measures of money
        Monetary banking institutions
        Money and its role
        Uniqueness of banks
        The cash reserve requirement
        Money creation does not start with a bank receiving a deposit
        Money creation is not dependent on a cash reserve requirement
        Is “money supply” a misnomer?
        The money identity and the creation of money
        Role of the central bank in money creation
        How does a central bank maintain a bank liquidity shortage?
        Bibliography
    Risk in banking
        Learning outcomes
        Introduction
        The concept of risk
        Interest rate risk
        Market risk
        Liquidity risk
        Credit risk
        Currency risk
        Counterparty risk
        Operational risk
        Bibliography
    Bank models & prudential requirements
        Learning outcomes
        Introduction
        Bank models
        Rationale, objectives & principles of regulation
        Prudential requirements
        Bibliography
    Endnotes

About the Author

Alexander Pierre Faure graduated from Elsenburg Agricultural College after school and went on to Stellenbosch University where he graduated with BA (Commerce), Hons BA (Economics), MA (Economics), and PhD (Economics).

He also successfully completed the Stockbroker Examination Requirements at Witwatersrand University (and is a registered Stockbroker - presently non-broking status).

He first worked for the central bank, where he was involved in compiling the monetary statistics (money stock and sources of change, and money market liquidity analysis) and later in the execution of monetary policy.

His career after central banking included private sector banking (the recipient of monetary policy), stockbroking (influenced by monetary policy) and interest rate analysis (reading monetary policy).

After his private sector experience, he became an academic and held the positions Investec Chair in Money and Banking (at Rhodes University and the University of Fort Hare) and Foord Chair in Investments (at Rhodes University).

He is currently at Rhodes University where he teaches financial markets and monetary economics.

He has published widely, including books and papers (his recent papers can be found at: http://ssrn.com/author=1786379).

He also served on a number of boards of directors, holding the positions of Non-executive Director and Managing Director.