Yet another unedited section from my banking primer manuscript. My feeling is that this section is packing in too much information, and might be trimmed. The technical appendix may be too technical, but I will look at that later. Although the major banks have global operations and currency trading is a massive financial market, this book largely ignores the complications created by banks operating in multiple currencies. The first reason is that the author has no useful experience in that area. The second is that currency risk is not a significant source of risk for well-managed banks. If a sensible bank is operating in two currencies, it is best understood as two banks operating in one currency, with one bank acting as parent. (From a regulatory perspective, the fact that the home base is in a different jurisdiction matters, but this text is not delving deep enough into details for that to be a concern.)
Primer: Currency Risks For Banks
Primer: Currency Risks For Banks
Primer: Currency Risks For Banks
Yet another unedited section from my banking primer manuscript. My feeling is that this section is packing in too much information, and might be trimmed. The technical appendix may be too technical, but I will look at that later. Although the major banks have global operations and currency trading is a massive financial market, this book largely ignores the complications created by banks operating in multiple currencies. The first reason is that the author has no useful experience in that area. The second is that currency risk is not a significant source of risk for well-managed banks. If a sensible bank is operating in two currencies, it is best understood as two banks operating in one currency, with one bank acting as parent. (From a regulatory perspective, the fact that the home base is in a different jurisdiction matters, but this text is not delving deep enough into details for that to be a concern.)