Risk Management and Value Creation in Banks

Gerhard Schröck () and Manfred Steiner ()
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Gerhard Schröck: Mercer Oliver Wyman
Manfred Steiner: University of Augsburg

A chapter in Risk Management, 2005, pp 53-78 from Springer

Abstract: Abstract Previous academic work has focused on why risk management at the corporate level is necessary and desirable from a value creation perspective rather than on how much or what sort of risk management is optimal for a particular firm/bank. Therefore, we develop in this chapter the foundations for a normative theory of risk management in banks. We first explain the need for a consistent framework for risk management at the corporate level in banks. We then move on to defining and examining RAROC (Risk-Adjusted Return on Capital), a capital budgeting rule currently widely used in the banking industry. We then introduce new approaches to capital budgeting and deduct implications from applying these new approaches in banks.

Keywords: Banks; Risk Management; Value Creation; Valuation; Capital Budgeting; Capital Structure (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-26993-9_3

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DOI: 10.1007/3-540-26993-2_3

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