Strategic Management of Profitability in Banking from an Asset-Liability View: Macroprudential, Microprudential, Stress Testing and Planning (The Moorad Choudhry Global Banking Series)

Can a bank be both profitable and fragile at the same time?The uncomfortable answer is yes. Banks do not fail simply because they take risks.They fail when those risks are mispriced, under-compensated, and allowed to accumulate over time. This book introduces Pricing Gap as a new analytical framework that moves beyond the traditional accounting view of banking.It argues that asset and liability management (ALM) should not be a passive control function, but a proactive engine at the heart of balance-sheet strategy.With a common methodology linking supervision, stress testing and strategic planning, Pricing Gap offers a powerful new lens through which to understand the resilience of banks. Through its discussion of fund transfer pricing, the book reveals the hidden gap between the prices embedded in a bank’s balance sheet and the risk-based prices required to sustain its business model over time.From this gap emerge two decisive concepts for modern banking: sustainability and viability.