MANAGEMENT POLICIES FOR COMMERCIAL BANKS

Second edition. ByHoward D. Crosse '31 and George H. Hempel.Englewood Cliffs, N.J.: Prentice-Hall, Inc.,1973. 322 pp. Cloth. $12.95.

I have often thought that one of the highest compliments one could pay a book would be to concur with the publisher's blurbs found on the jacket cover. I am pleased to say that this book qualifies. It provides complete coverage of the major policy areas of concern to the management of a commercial bank. The material is presented in a lucid, self-contained manner which demands only a minimal business or economics background. It should therefore be useful both to the practicing banker and to the student of banking.

The core of the book is concerned with the problem of managing the assets and liabilities of a bank in the most profitable manner consistent with a level of risk acceptable to the management, shareholders, and supervisory authorities. This involves study of the areas of management of the loan and investment portfolios, estimation of and provision for liquidity, deposit management, and determination of the size and structure of the capital accounts. I found the appearance and discussion of the last two subjects of particular interest, since they reflect some important recent trends in commercial banking.

Traditionally, banks were thought to regard the size and composition of their deposits as determined by forces outside their control and to respond to exogeneous,changes in their deposits by appropriate adjustments in asset size and composition. In the past decade, however, spurred by rising interest rates and growth of the market in certificates of deposit, banks increasingly have come to emphasize "deposit management." This refers to the techniques of attracting deposits, primarily through altering the effective yields (defined to include services) offered on various types of deposits. Efforts to attract, rather than merely receive, deposits are useful not only for adjustments to short-run disturbances but also as a source of funds for long-run growth. Similarly, innovations in capital instruments have led to increased emphasis on management of the capital structure. In general, these chapters show how management of the liability and capital structures can contribute to bank goals, including the provision of liquidity.

I liked this book.

Dartmouth Assistant Professor of Economics.Mr. Dobson teaches courses in Statistics, Macroeconomics. and Money and Banking.