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Foundations of Banking Risk: An Overview of Banking, Banking Risks, and Risk-Based Bank

Book Review: A primer for those new to banking risks

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  • By  Deanna Radich
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  • Comments:   comments
Foundations of Banking Risk: An Overview of Banking, Banking Risks, and Risk-Based Banking Regulations, by Richard Apostolik, Christopher Donohue, and Peter Went, 264 pp., Wiley Finance, 2009. Foundations of Banking Risk: An Overview of Banking, Banking Risks, and Risk-Based Banking Regulations, by Richard Apostolik, Christopher Donohue, and Peter Went, 264 pp., Wiley Finance, 2009.

This book is intended to be used while studying for the Global Association of Risk Professionals (GARP) International Certificate in Banking Risk and Regulation. The book is organized in standard textbook format, walking the reader through definitions and examples in a systematic fashion. The authors are senior officials of GARP and all have prior professional experience in disciplines related to the topic.

The book begins by explaining how financial institutions are critical to the cycle of creating money in the economy. The text is introductory in nature, intended for individuals that have little to no experience in banking.

Discussion continues with information regarding corporate governance. Management structure is discussed, along with the components that make up the balance sheet and income statement, and loan loss risk.

Deeper detail regarding risk management starts with Chapter 3. The book describes credit risk, starting in the first chapter with the basics of underwriting and later following up with descriptions of credit products and credit risk management. Operational risk and market risk are discussed at a high level.

As an GARP is an international organization, it makes sense for the book to have plenty of information regarding Basel II. The start of the book tells the reader how the Basel Accords were created, and the final chapter is dedicated to the topic.

As the title implies, Foundations of Banking Risk is a very basic primer. The examples are plentiful and relevant to their placement in the text. The text would be applicable to new professionals in risk management, new regulatory examiners, or anyone interested in obtaining GARP certification.

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