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Risk Management and Value Creation in Banks

In: Risk Management

Author

Listed:
  • Gerhard Schröck

    (Mercer Oliver Wyman)

  • Manfred Steiner

    (University of Augsburg)

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.

Suggested Citation

  • Gerhard Schröck & Manfred Steiner, 2005. "Risk Management and Value Creation in Banks," Springer Books, in: Michael Frenkel & Markus Rudolf & Ulrich Hommel (ed.), Risk Management, edition 0, pages 53-78, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-26993-9_3
    DOI: 10.1007/3-540-26993-2_3
    as

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