ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00110.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00111.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

The banking industry represents an interesting and important case study of how changes in technology and regulation influence business strategy and organizational design. A narrow focus on traditional bank products and performance measures would lead one to conclude that banking is a declining industry. Such a focus, however, would miss most of the innovations in banking–most notably, the move to “off‐balance‐sheet” activities–that have been taking place in recent years. A broader perspective shows banks evolving in ways that are enabling them to provide the same basic functions as before, but in new, more efficient ways.In the past, most banks thought of themselves as delivering a set of specific, largely unrelatedproductsto different sets of customers. Today many banks are pursuing strategies that aim to strengthen their ability to perform variousfunctions–for example, financial planning for retail clients, or raising capital for middle market companies–that tend to cut across the old product boundaries. As a result, and in contrast to most industrial firms, many banks are offering amore diversifiedrange of products and services than ever before with the aim of exploiting potential synergies among those products.Such major changes in banks' strategies are in turn leading to fundamental changes in their “organizational architecture.” Some banking activities that were once controlled by a rigid management hierarchy are now being decentralized, whereas other functions that were largely decentralized are being subjected to more central coordination to help realize potential economies of scale and scope.Along with these changes in decision‐making authority, banks are also being forced to rethink their internal performance evaluation and incentive compensation systems. As an ever larger portion of their activities continues to move off balance sheet, more and more banks are deciding that conventional accounting measures of bank operating performance such as ROA and ROE are inadequate, and thateconomicmeasures of performance like RAROC and EVA are needed to reflect the new reality of where banks are putting their capital at risk, and whether the rates of return they are earning on their different activities are high enough to rewa

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00112.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00113.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00114.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

The American corporate financing system, unlike that of most other countries, has not been organized around a set of “universal banks” that perform a variety of functions for their clients. Indeed, the distinguishing feature of American financial history is the number and variety of financial intermediaries, and their relationships with corporations (and one another). Besides commercial banks, there are investment banks, insurance companies, venture capitalists, commercial paper dealers, mutual funds, and many others. The economic role of such intermediaries is to reduce market frictions such as “asymmetric information” and “agency problems” that otherwise raise the cost of outside capital for U.S. companies.This article views the changing menu of such intermediaries and their networks as the driving force behind the evolution of American corporate finance. U.S. financial history is seen as a series of institutional and financial innovations designed in large part to work around costly restrictions on relationships–particularly, limits on the scale and scope of U.S. banks–that do not exist in most other countries. In terms of its success in reducing the information and control costs of corporate finance, the history of the American financial system includes periods of significant progress as well as major reversals. Three relatively successful periods– the early 19th‐century in New England, the “incipient” universal banking of the 1920s, and modernday financial capitalism–are separated by periods of drastic reductions in the menu of financial relationships– particularly the Great Depression and its 20‐year aftermath.Besides new financial claims like preferred stock and new intermediaries such as venture capitalists, another important innovation isnew forms of cooperationamong intermediaries– especially among banks, venture capitalists, trusts, pensions, and investment banks–that have enabled the U.S. financial system to provide some of the key advantages of universal banking systems. Some of the largest U.S. commercial banks today can be viewed as positioning themselves to play a central coordinating role in these new coalitions of intermediaries. In so doing, they may become the platform for a distinctively

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00115.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

Wells Fargo's recent acquisition of First Interstate Bancorp represents one of the relatively uncommon cases in which the economic values of both the acquiring and acquired banks increased sharply upon announcement of the deal. The transaction is also one of the few cases where the bidder in a major bank acquisition chose purchase instead of pooling accounting–despite the fact that the deal was openly hostile and that Wells Fargo had to fight off a competing bid from First Bank Systems.Based on the stock market's reaction to this merger battle, as well as the results of their study of 153 bank mergers over the period 1985–1991, the authors argue that the most promising mergers are those presenting large opportunities to reduce costs by eliminating redundant operations. The stock market is much less responsive to other merger rationales such as diversification or entry into new markets in pursuit of growth.The Wells case also suggests that a preoccupation with the accounting treatment of a merger is a mistake if it becomes the primary reason for turning down a deal that creates economic value, or if it prevents the bidder from choosing the lowest‐cost method of financing the deal. Throughout the bidding contest for First Interstate, the stock market responded positively to the success of Wells Fargo's efforts, even though purchase accounting would have a large adverse impact on reported earnings.But if the stock market does not appear to care about the accounting treatment of a merger, the method of financing does appear to matter to investors. In general, acquisitions financed with cash are viewed more favorably by the market than stockfunded transactions. The evidence also suggests, however, that acquiring firms can reduce the negative impact of stock deals by makingconditionaloffers (those in which the number of shares depends on the stock price performance of the acquirer) and by combining such offers with stock repurchase pro

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00116.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

In 1993, Bank of America's Risk and Capital Analysis Group was charged with the task of developing and instituting a single corporate‐wide system to allocate capital to all the bank's activities. Since 1994, that system has been providing quarterly reports of risk‐adjusted returns on capital (RAROC) for each of the bank's 37 major business units. By 1995, B of A had also developed the capability to calculate RAROC down to the level of individual products, transactions, and customer relationships.RAROC systems allocate capital for two basic reasons: (1) risk management and (2) performance evaluation. For risk management purposes, the overriding goal of allocating capital to individual business units is to determine the bank's optimal capital structure–the proportion of equity to assets that minimizes the bank's overall cost of funding. This process involves estimating how much the risk (or volatility) of each business unit contributes to the total risk of the bank, and hence to the bank's overall capital requirements. For performance evaluation purposes, RAROC systems assign capital to business units as part of a process of determining the risk‐adjusted rate of return and, ultimately, the “economic profit” of each business unit. The objective in this case is to measure a business unit's contribution to shareholder value, and thus to provide a basis for effective planning, capital budgeting, and incentive compensation at the business unit level.Concerns about capital adequacy, along with the Basel risk‐based capital requirements, have played some role in the growth of RAROC among commercial banks. But the most powerful impetus to bankers' use of more systematic risk measures is coming from increasingly activist institutional investors. Besides giving senior management an economic basis for evaluating the bank as a portfolio of businesses and for making resource allocation decisions that improve the bank's risk/reward profile, RAROC systems are also expected to produce better performance by holding managers accountable for the amount of investor capital they are pu

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00117.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

This article presents a complete ranking of America's 100 largest bank holding companies according to their shareholder value added. This research, the first of its kind for the banking industry, defines an EVA measurement for banks and presents evidence of EVA's stronger correlation with bank market values than traditional accounting measures like ROA and ROE.Besides developing EVA and MVA as analytical tools for viewing the economic performance of the organization from a shareholder perspective, the authors also present a framework for calculating EVA at all levels of the organization, including lines of business, functional departments, products, customer segments, and customer relationships. The implementation of an EVA profitability measurement system at the business unit (or lower) level requires methods for three critical tasks: (1) transfer pricing of funds; (2) allocation of indirect expenses; and (3) allocation of economic capital. Although solutions to the first two are fairly straightforward, the allocation of capital to business units is a major challenge for banks today. In contrast to the complex, “bottom‐up” approach used by a number of large banks in implementing their RAROC systems, the authors propose a greatly simplified, “top‐down” approach that requires calculation of only the volatility of a business's operating profit (or NOPAT). The advantage of using NOPAT volatility is that it allows EVA analysis at any level of the organization in a way that captures the volatility effects from all sources of risk (credit, interest rates, liquidity, or operations).While such a top‐down approach is clearly not meant to take the place of a comprehensive, bottom‐up RAROC analysis, it is intended to provide a complement–a high‐level “check” on the detailed, bottom‐up risk management procedures and controls now in place at most banks. Moreover, for those banks that have developed extensive funds transfer pricing, cost allocation, and RAROCstyle capital allocation systems, the EVA financial management system can either be integrated with those systems or serve as an independent economic assessment of the bank's b

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00118.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY

摘要:

According to some observers, the commercial bank–an institution that conducts the twin activities of accepting deposits payable on demand and originating loans–has outlived its usefulness and is in a state of terminal decline. The broad statistical evidence for this contention, however, is somewhat mixed. While some studies suggest that the role of banks in the United States is declining, others suggest that banks are simply using new vehicles to offer their services and that their role has not diminished at all.This article takes a different approach to analyzing the future of banks by examining the economic rationale for their past existence and exploring the extent to which this rationale can be expected to hold up in the future. The author begins by explaining why the two core banking activities–taking in deposits payable on demand and originating non‐marketable loans–are performed by the same institutions. The explanation turns on the recognition that both activities essentially require the institution to come up with cash on short notice–that is, to provide liquidity. Scale economies in providing liquidity explain why both activities are provided by the same entity.Deregulation and innovation have increased competition in the financial services industry, which has forced banks to concentrate on the essentials of liquidity provision. This is why the outward nature of banks' activities has changed (for example, banks today often sell instead of holding loans, and provide back‐up lines for commercial paper instead of originating loans), though not their underlying economic rationale (particularly the credit evaluation and monitoring involved in “relationship” banking).Beneath the surface reality of dramatic changes in financial products and services, the fundamental banking business of liquidity provision is alive and well. Moreover, in the course of performing their traditional activities, banks have acquired competencies that enable them to perform a variety of other financial and nonfinancial activities that deregulation and innovation have opened up to them. As part of their evaluation of these nontraditional activities, bankers must ensure that their organizational structures, controls, and compensation policies are appropriate for the new environment of deregulation and tec

ISSN:1078-1196    

DOI:10.1111/j.1745-6622.1996.tb00119.x

出版商:Blackwell Publishing Ltd    

年代:1996

数据来源: WILEY