A SYSTEMS APPROACH TO BANK PRUDENTIAL MANAGEMENT AND SUPERVISION: THE UTILIZATION OF FEEDFORWARD CONTROL

Edward P. M. Gardener

Journal of Management Studies, 1985, vol. 22, issue 1, 1-24

Abstract: This paper explores the operational characteristics of a new systems approach for monitoring the prudential strength, or safety, of modern commercial banks. It exploits the principle of feedforward control through the simulated contingency analysis of a bank's planned financial and associated management positions. This approach will be shown to have operational potential for both individual bank managements and the supervisory authorities who monitor the prudential soundness of all banks. Most of the research to date in this field has been concerned with assessing the adequacy of a bank's capital funds, its capital adequacy position. The primary function of bank capital is to act as a kind of internal insurance fund in order to protect a bank against uncertainties.

Date: 1985
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