Extending the Canon: New Titles

Securitisation Law | The Flaw of Averages | Hedge Fund Alpha Fallen Giant | Fool’s Gold | Wall Street Revalued | A Colossal Failure of Common Sense

Securitisation Law: EU and US Disclosure Regulations by Joseph Tanega. 2009. LexisNexis Butterworths. 395 pages. £247.00.

Review by Viktoria Baklanova

Securitizations accounted for half of the $5.7 trillion raised in the US credit markets in 2007, according to the American Securitization Forum. Today the world is a very different place. Over the last couple of years, the problems in the structured finance markets have served to manifest the many faults in monetary policy and regulatory bodies, as well as highlighting the folly of human avarice. Yet securitization remains one of the most powerful financial innovations of the last century. On a practical level, it has enabled more people to own homes, pursue educations, or run small businesses, and it improved the standard of living globally.

Securitization has become one of the key financing mechanisms not only for the financial sector but also for the real economy. Overleveraged forms of structured finance such as CDOs (collateralized debt obligations) may remain unpopular, but asset-backed and mortgage-backed instruments that serve a legitimate purpose in terms of risk redistribution will survive and flourish, provided the appropriate legal structure is put in place.

In Securitisation Law, Joseph Tanega sets out the relevant regulations that govern ABSs (asset-backed securities) in the US and the EU (with a focus on the United Kingdom and Ireland). Tanega is no stranger to the issue of risks in securitization transactions; he is a senior lecturer at University of Westminster School of Law and a former senior legal consultant on securitization to the World Bank. Well-versed in the arcane legal language of vastly different systems, Tanega is able to take a global perspective.

Tanega engages the reader in an up-to-date discussion of the transparency mechanism and provides checklists of disclosure items along with practical aids such as flow charts. He compares ABS disclosure regulations governed by the US Regulation AB and the EU Prospectus Directive and Prospectus Regulation.

No book on securitization and the law can be an easy read, but Tanega’s book is a valuable guide, published in the hour of our need. As George Walker, of the University of London, writes in his introduction, the book “provides an essential theoretical and professional treatment of this complex area but in a way that is at the same time complete and detailed, but easy to follow, understand and appreciate.” Tanega begins with clear definitions of ABSs and an exploration of the subtle differences between these definitions–as well as disclosure requirements–in the US and EU. He then offers his interpretation of the risk symmetry framework in the kernel of securitization transactions.

Tanega engages the reader in an up-to-date discussion of the transparency mechanism and provides checklists of disclosure items along with practical aids such as flow charts. He compares ABS disclosure regulations governed by the US Regulation AB and the EU Prospectus Directive and Prospectus Regulation. Security analysts and practicing attorneys will appreciate the comprehensive analyses of the major legal decisions on securitization transactions, including cases involving Enron, Parmalat, and the recent subprime meltdown.

As the modern economy opens the door to financial innovations and new products and methods, investors must recognize the nonroutine ways in which the new markets operate. Disclosure is a key component in enhancing investors’ risk awareness. The value of complete, consistent, and truthful financial-transaction disclosures cannot be overestimated for both legal professionals and educated investors. In the postcrisis world, intimate familiarity with the building blocks of disclosure is a prerequisite for both the investment and risk management professions.

Viktoria Baklanova, CFA, PRM, is a senior director of the Fund and Asset Manager Rating Group at Fitch Ratings in New York.

The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty
by Sam L. Savage. John Wiley & Sons. 2009. 416 pages. $22.95.

Review by Jeffrey S. Chang

The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty
In the summer of 2003, Red Lobster launched the infamous “Endless Crab” campaign, touted as “a celebration of all the hot, steaming snow crab legs you can eat.” It turned into one of the most highly publicized statistical miscalculations in recent memory. Red Lobster executives grossly underestimated the average American’s appetite for crab legs. “It wasn’t the second helping, it was the third one that hurt,” recounted chief executive Joe Lee. Company executives also failed to account for a rise in wholesale crab prices, which eroded the company’s profit margin as the promotion drove up demand for crab nationwide. This incident and many others are richly described in Sam Savage’s aptly titled volume The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty.

Savage’s objectives are to reveal the pitfalls of using single-number averages in the face of uncertainty and to lift “the algebraic curtain separating the real-life manager from management science.” Savage, a professor of management science at Stanford University, is a gifted writer whose accessible writing style is a refreshing departure from the droning prose of many academics. As a pioneer in the emerging field of probability management (the practice of managing risk in a corporate environment), he has produced what, in essence, is a general management book disguised as a dissertation on statistical analyses.

The opening chapters provide a concise overview of statistical concepts for those uninitiated to “steam era” statistical jargon such as standard deviation and covariance. Readers with deeper quantitative backgrounds may feel compelled to skip these chapters, but Savage’s passion for the subject and keen sense of imagery make for quick reading. One of his memorable depictions of the flaw of averages is of a drunken man stumbling down a busy highway. While the man’s position is an average position in the middle of the road, he is still, on average, a dead man.

Students of history will also enjoy Savage’s rendition of the evolution of statistical analysis over the last 50 years. Particularly fascinating is the retelling of how the SRG (Statistical Research Group) was able to accurately estimate the number of German tanks during World War II. The SRG also advised the military on the placement of protective armor on bombers by examining where returning aircraft were not hit by bullets.

Savage establishes core principles to mitigate the flaw of averages. His five principles, or “mindels,” dictate that, for example, uncertain numbers should be thought of as probability distributions and that interrelationship between uncertain numbers can have a profound effect on risk. Though such assertions will hardly be provocative and disagreeable to most investment professionals, he cites numerous case studies, including evidence from the recent banking crisis and collapse in the housing market, as discrete examples of the blatant disregard for these principles.

In working toward a cure for the flaw of averages, Savage offers several remedies, some more progressive than others. Like many statisticians, he is a strong advocate of employing Monte Carlo simulations to better characterize and visualize risk. Recognizing the weakness of Monte Carlo–style risk modeling, he sees the need for a standardized library of probability distributions for everything from the return expectations of stocks and bonds to the successful development of a blockbuster pharmaceutical drug and the discovery of a new natural gas field. In this new world, in which unknown numbers are represented by a defined probability distribution, companies would rely on “chief probability officers” to more effectively manage systematic risk across an organization.

Readers indoctrinated into Nassim Nicholas Taleb’s world of “fat tails”–in which the variables with the greatest impact are those that are unknowable–will likely be Savage’s most vociferous critics. Taleb’s adherents argue that it was the overreliance and overconfidence in the financial system’s complex Monte Carlo–derived risk management models that created the most recent financial crisis in the first place. While Savage is likely the first to admit that Monte Carlo simulation is not the holy grail of risk modeling, he has successfully raised the bar of statistical understanding that will, at the very least, help prevent many avoidable risk-modeling missteps. The Flaw of Averages is a rare mix of entertainment and education. It will appeal to both general business managers and experienced quantitative professionals.

Jeffrey S. Chang is an investment associate at Performance Equity Management, a private equity investment company based in Greenwich, Connecticut.

Hedge Fund Alpha: A Framework for Generating and Understanding Investment Performance edited by John M. Longo. World Scientific. 2009. 317 pages. $49.95.

Review by Boriana Handjiyska

Generating and understanding performance are two distinct processes that often require different skill sets and are typically performed by different arms within a hedge fund organization. The former falls under the realm of the portfolio manager; the latter is often provided by the CFO, COO, or investor-relations functions at the hedge fund. Editor John Longo skillfully combines explanations of both processes in a coherent volume. The essays in this book elucidate what the alpha-generation process is, as well as how the outcome of that process is assessed, evaluated, and monitored. While these are separate questions, there is a feedback mechanism between the two, which reinforces the importance of understanding both topics.

In the first section, “Generating Performance,” Longo starts by addressing the question of whether alpha exists. Concluding that it does, at least on an individual basis, he then focuses on how alpha generation by hedge funds differs from the traditional long-only model. A fertile ground for alpha can be found wherever inefficiencies exist, such as across regions and across asset classes. Alpha can be delivered via superior investment mosaic and superior execution, and it can be enhanced through the diversification of strategies via multistrategy funds and through the diversification of portfolio managers via fund of funds, to name some of the broader methods. Longo and a selection of experts delve into each of these sources of alpha. For example, when it comes to the emerging markets of the BRIC countries, the authors provide a foundation for understanding each market, detailing its history, regulations, psychology, and peculiarities.

The second half of the volume, “Understanding Performance,” addresses the following questions: What drives a portfolio manager’s decision-making process? And, how do we evaluate the achieved performance? In the chapter on “The Psychology of Hedge Fund Managers,” Longo examines the incentives for portfolio managers, specifically noting that they may not be perfectly aligned with the investors’ interests due to the call option nature of hedge fund compensation. In addition, portfolio managers may suffer from a number of psychological biases that may impact their decision-making processes.

What is particularly unique and appealing about this book is Longo’s skillful combination of the portfolio manager’s and the investor’s perspectives. Those perspectives represent two sides of the same coin, and this book will benefit anyone who is familiar with only one side of it.

Performance can be evaluated relative to the risk taken and relative to market indices. This and other quantifications of performance and risk are the subject of Saad Rathore’s chapter on “Risk Management for Hedge Funds.” The author discusses various metrics such as alpha, beta, the Sharpe ratio, the Treynor ratio, the Sortino ratio, and others, highlighting the importance of delta- and beta-adjusting exposures, as well as tracking leverage and liquidity. The important subject of due diligence is covered in detail by Erman Civelek, an expert on this topic.

One of the most fascinating chapters is the concluding one, which identifies seven trends in the hedge fund industry. Longo believes that there is a tendency toward lower fees, increased transparency, and a greater focus on niche strategies and markets (such as trading carbon credits or investing in emerging and frontier markets). The former two trends, one could argue, have already been observed to some extent in the market place. The third one may take longer to come in full force, as there appears to be a plethora of opportunities that utilize more-traditional strategies.

The title of the book suggests an ambitious agenda covering a broad set of topics, and this breadth is achieved. A rigid structure, stand-alone chapters, and numerous short sections within each chapter help the book live up to the promise of its title; it is, indeed, a “framework.” While the book contains more information than a review could possibly cover, in some cases the reader may find herself asking for more content, real-life cases, and intuitive explanations of the concepts. But, what is particularly unique and appealing about this book is Longo’s skillful combination of the portfolio manager’s and the investor’s perspectives. Those perspectives represent two sides of the same coin, and this book will benefit anyone who is familiar with only one side of it.

Boriana Handjiyska, CFA, is an associate at Morgan Stanley, where she provides portfolio analytics services to hedge fund clients.

Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG
by Ron Shelp, with Al Ehrbar. John Wiley & Sons. Second Edition, 2009. 281 pages. $16.95.

Review by Arjun Kondamani

Though the title would suggest that Fallen Giant dissects the collapse of AIG, nearly two-thirds of this book is given over to a chronological analysis of how AIG became an insurance powerhouse. Author Ron Shelp, who worked for AIG and served on a number of the company’s boards, does a great job of delving into individual personalities and their motivations, leaving the reader with a front row seat to AIG’s genesis, growth, and fall from grace.

Shelp leaves no doubt that two people were the principal architects in creating and fostering AIG–first C. V. Starr, and later Hank Greenberg. An open-minded, ambitious Californian, Starr sought thrills outside the US in the early twentieth century. Settling in Shanghai, he became a trailblazer in insurance and was immensely rewarded for his energy and innovation. More importantly, his dynamism and energy translated into a blanket of insurance firms with a global presence. In the AIG saga, Starr is like the early morning fisherman who works hard to creatively cast a wide net and gains the precious first-mover advantage.

As his days came to a close, Starr had succeeded in creating a formidable network of enterprises spanning the globe, but he still ran AIG like a family-owned proprietorship. Starr’s efforts saw the reach but did not generate the profits that his widely cast net should have garnered. Inefficiency, rising expenses from loose management, and missed productivity were at the fore when AIG’s second ruler, Hank Greenberg, took control. While sharing Starr’s ambition, vision, and love for global expansion and the Asian markets, Greenberg was more intense, detail-oriented, and focused on operating efficiency than his predecessor. Greenberg’s overhaul of operations came at a ripe time in the AIG chronology, as did his push to take the firm public; he was single-handedly responsible for tapping the full potential of the AIG global franchise. He squeezed every cent of profitability out of the company, which translated into a vaunted 24% annual return for shareholders and firmly established the company in the Fortune 500. Greenberg was also a savvy political player and civic participant, winning concessions for AIG from political networks, both at home and abroad.

AIG grew tremendously in size and revenue under Greenberg’s leadership, but the 15% increase in profits year after year became statistically untenable. Fallen Giant explains how the pressure to produce outsized growth forced Greenberg to play from the baseline, winning needed points for AIG in gray areas such as accounting and regulation. Not realizing that the game rules had recently changed–with implementation of the Sarbanes-Oxley Act, among other changes–he paid dearly for this strategy. The ambitious attorney general Eliot Spitzer was gunning for political recognition and targeted Greenberg in his crosshairs, leaving no stone unturned. As Shelp points out, even though AIG’s individual trespasses were minor, a combination of events toppled the giant.

AIG is a complicated onion-like entity formed by many layers. While Shelp’s primary objective in exposing the two most prominent personalities–Starr and Greenberg–is achieved, at other times the reader is burdened with too many details. Shelp sometimes smothers the reader with his Rashomon-like approach to recounting events, burying us in the minutiae of secondary personalities and intermediate holding companies.

Arjun Kondamani is a corporate trader with Northeast Securities. He is involved with the trading of credit instruments with institutional money managers.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan
by Gillian Tett. Free Press. 2009. 293 pages. $26.00.

Review by John Merante

In 1994 a group of young, bright JPMorgan bankers from the swaps department met in Boca Raton, Florida, for an alcohol-fueled weekend of frat-house pranks and intense financial discussions. At these meetings they generated an idea that would change modern finance: how to use derivatives to manage credit risk attached to the loan book of banks.

Tracing the history of the derivatives team from the Boca Raton meeting to the beginning of 2009, Gillian Tett describes the genesis and fall from grace of the booming credit derivatives market, and how the use and abuse of once-obscure products such as CDSs (credit default swaps) and CDOs (collateralized debt obligations) brought the world to the edge of a depression.

Tett, who oversees the global coverage of the financial markets for the Financial Times, brings to bear her training as a journalist and an anthropologist to examine why bankers, regulators, and rating agencies collaborated to build a system that was doomed to self-destruct. She identifies a number of contributing factors: ideological adherence to efficient market theory; monetary policy that created a low-interest-rate environment; investors hungry for yield; rapidly growing businesses that took on momentum of their own; and perhaps most important, the failure of bankers, traders, regulators, and investors to remember that credit derivatives could reduce risk, but also create a good deal more risk.

Tett brings to bear her training as a journalist and an anthropologist to examine why bankers, regulators, and rating agencies collaborated to build a system that was doomed to self-destruct.

The Morgan team devised some of the first credit derivatives. Once the Federal Reserve issued guidance in 1996 that banks could use credit derivatives to reduce capital requirements, the opportunities presented by regulatory arbitrage unleashed demand for these new products. As business grew, Morgan and its competitors looked for ways to expand the use of their new inventions. Multitranche CDOs gave way to riskier single-tranche CDOs, CDOs of CDOs, CDOs squared, and synthetic CDOs (or CDOs of CDSs). Innovation led to more complexity, more leverage, and more risk that fewer and fewer people understood.

In the 1990s these products were used mostly for commercial loans and sovereign debt. After the tech bubble burst in 2000, however, derivatives became a larger contributor to profits, and banks intensified the search for new areas to apply their risk management skills. Mortgage finance was an obvious opportunity. As the Federal Reserve lowered interest rates in the wake of the NASDAQ crash and then the 2001 terrorist attacks, mortgage finance boomed.

JPMorgan’s team looked at mortgage financing and quickly decided that there was insufficient data to model correlation among mortgage loans with any confidence. The bank wisely chose not to pursue it. Correlation risk, however, did not stop the bank’s competitors from jumping in. New innovations in credit derivatives were now combined with innovations in consumer credit such as subprime mortgages, option ARMs (adjustable-rate mortgages), interest-only mortgages, and other forms of lending that layered risk factor on risk factor.

As thorough as Tett is in her history, the reader is left with a few nagging complaints: Drawing largely from interviews with Morgan alums, she depicts Morgan bankers as pursuing a dream of a perfect financial world, while their competitors are driven by short-term gain, and the reader is left questioning her impartiality. She is unprepared to ask if CDOs and CDSs actually create a more complete market or if they simply take advantage of regulatory arbitrage. If the idea is to move risk to the strongest hands, why should we suppose that society is better served by selling derivatives to underfunded pension plans or highly leveraged hedge funds instead of holding the risk on the balance sheet of the bank that originated the loan, knows the client best, and is required to hold sufficient reserves against the risk?

Credit derivatives, according to a guide published by JPMorgan in 1999, would enable investors to separate specific aspects of credit risk from other risks. This would allow even the most illiquid credit exposures to be transferred to the most efficient holders of risk. In 1992, however, Felix Rohatyn called derivatives “financial hydrogen bonds, built on personal computers by twenty-six-year-olds with MBAs.” History now seems to favor Rohatyn’s description.

John Merante, CFA, is a banker and economist who has advised governments in Asia and Latin America on financial crises and debt restructuring.

Wall Street Revalued: Imperfect Markets and Inept Central Bankers by Andrew Smithers. John Wiley & Sons. 2009. 246 pages. $27.95.

Review by Paul Tanner

Andrew Smithers, a London-based economist who advises institutional and private clients on asset allocation, showed great foresight in his previous book, Valuing Wall Street: Protecting Wealth in Turbulent Markets. Cowritten with Stephen Wright, the book appeared in the spring of 2000 and argued that the market was massively overvalued. Few analysts agreed with Smithers and Wright at the time, but over the next nine years the S&P 500 lost nearly half of its nominal value.

In his follow-up, Wall Street Revalued, Smithers argues that investors and central bankers need a new theory, one that does not accept the efficiency and wisdom of the markets but instead gives clear signals when bubbles are developing. For Smithers this demands no less than a paradigm shift to dislodge the efficient market hypothesis permeating academia and guiding central banks. The Federal Reserve’s reluctance to pop the late 1990s equity bubble, which contributed to the terrible consequences that followed through unnecessary monetary easing, is cited as evidence of the need for a new theory.

While Smithers’s book addresses the need for a new and expanded focus for central bankers, it primarily examines the fundamental underpinnings of equity and credit returns. Smithers proposes an alternative model, which he calls the “imperfectly efficient markets hypothesis,” and suggests two measures for equity valuation and corresponding returns: the Q ratio and CAPE (cyclically adjusted price-earnings) ratio. The Q ratio divides a company’s market value by its replacement costs; over the long run, the result should hover around one in a competitive economy. In reality, however, adjustments for intangibles (e.g., R&D, advertising), depreciation, and other factors result in a ratio less than one. The CAPE ratio, also known as the P/E 10 ratio and detailed in Robert Shiller’s Irrational Exuberance (Princeton University Press 2000), calculates fair value by comparing current stock market prices with a real 10-year average of earnings per share.

Smithers helpfully makes extensive use of graphs to illustrate model results. He uses a testing method with holding periods ranging from 1 to 30 years because this gives “the average return that investors with different time horizons would have received from the given starting point.” Investors, however, typically have holding periods much longer than one year, so it is unclear how the average return applies–especially to taxable investors. Nevertheless, as an example, he determines that the US market was almost exactly at fair value at the end of 1976, noting “the return from the end of 1976 to the end of 2008 was 6.1% compared with the return from 1899 to 2008 of 6.02%.” This method seems unorthodox because using a 109-year average to determine fair value assumes constant risk. Having suffered a devastating civil war and being an industrial lightweight compared to Europe, the US had risks closer to an emerging market in the early decades of this time series and should have had much higher expected returns.

Both measures of equity valuation produce comparable results. Yet for all this effort in calculating fair values, Smithers notes that only twice has the market become so overvalued that it was worth selling. He observes that “there have been only five peaks in the market’s overvaluation since 1900.… The average time between peaks has been 24 years but the average is far from regular and each of the last two swings has taken over 30 years from peak to peak.” Given the degree of difficulty in timing a bubble, a comparison to a simple buy, hold, and rebalance strategy would be helpful.

Smithers’s fresh perspective and quantitative approach is thought provoking. His belief that the equity risk premium is “unstable and therefore cannot be used sensibly to value equities” is easy to dismiss but reflects a macroeconomic approach.

Those hoping to uncover insights that enhance their portfolio management processes will need to exercise patience and care with Smithers’s approach. Avoiding asset bubbles preserves wealth, but the warning signs are few, and exiting equity markets early, due to imprecise signals, may actually result in lower long-term returns. The debate over whether markets efficiently reflect all knowable information remains contentious. Even the most ardent supporters of market efficiency acknowledge it is not perfect, information has costs, and theory does not preclude huge volatility.

Paul Tanner, CFA, is principal of Granite Hill Capital Management LLC, in Ridgefield, Connecticut.

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald, with Patrick Robinson. Crown Business. 2009. 351 pages. $27.00.

Review by Peter Went

Two thousand and eight was the annus horribilis that changed Wall Street and Main Street. Among all the historic, previously unimaginable, and stunningly painful events, it is perhaps the collapse of Lehman Brothers that stands out the most. Lehman, the fourth-largest investment bank in the US, failed and filed for bankruptcy in September 2008. Prior to filing, the company held more than $600 billion in assets, making this the largest bankruptcy ever.

Why did Lehman collapse? Was it too small to bail out? Was the severity of the crisis poorly understood? Was Lehman unsalvageable? What could have been done differently to avoid the collapse? In A Colossal Failure of Common Sense, Lawrence G. McDonald, a former vice president of distressed debt trading at the firm, seeks to answer these and other questions by providing a personal account of the road to the collapse. The contributions of cowriter Patrick Robinson, a best-selling author of thrillers, lend a sense of excitement.

In McDonald’s account, the characters at Lehman are cast in either black or white: they either contributed to the failure of Lehman (e.g., chairman and CEO Richard S. Fuld and COO Joseph Gregory) or were dedicated employees with professional pride, determination, exceptional talent, and a strong work ethic (e.g., the guys on the trading floor). Fuld is described as a Machiavellian operator, who became completely detached from the daily activities of his firm over time, communicating through a select group of loyal subordinates and plotting strategies to elevate Lehman to the level of the larger investment banks he envied. Fuld and Gregory aggressively pursued a leverage-fueled expansion spree into real estate–related assets and highly risky, very sophisticated financial products. Commercial real estate and securitization were the focus of their strategy.

To fulfill its ever-increasing appetite for mortgages to be securitized, Lehman relied on its pipeline from BNC Mortgage, its California subsidiary. The book’s thinly veiled suggestion is that Lehman’s profits (and management’s outsized bonuses) depended on “bodybuilders,” the West Coast brokers who sold mortgages to consumers–whether the purchasers needed one, understood what a mortgage was, were able to repay a mortgage, or existed at all. Even when the losses in the mortgage portfolio were rapidly accumulating, the actual leverage of Lehman was astronomical, and increasingly louder alarm bells were ringing in the corridors, Fuld and the firm’s top management were not ready to reduce the outsized risks the firm was taking. The successful coup d’état to unseat some of top management just prolonged the inevitable. Once the genies of entitlement, unmitigated risk taking, poor corporate stewardship, senseless growth, unethical behavior, and unabated greed were out of the bottle, nothing and nobody could put them back.

Throughout the book, McDonald and Robinson describe the intricacies of modern finance and the financial meltdown in an easily accessible way and in the style of a good thriller. All of the tension, pressure, and nervous aggression that characterize the trading desk come alive. The authors provide a nontechnical explanation of why large banks failed and needed government support.

In the vein of Michael Lewis’s Liar’s Poker, the book provides insight into the corporate psychology, culture, and value system of Lehman. Highly enlightening are the stories that describe the daily work on the trading floor. What A Colossal Failure of Common Sense does not provide is the personal perspectives of Fuld and all those at the top of Lehman’s management who made the decisions that later proved disastrous and ultimately sealed Lehman’s fate. As long as their side of the story is not told, the tale of Lehman’s route to ruin remains one-sided. Because this book is nothing short of an indictment of Fuld, Lehman’s board, and some of its senior management team, their version of events needs to be told.

Peter Went, PhD, CFA, is a senior researcher at the GARP (Global Association of Risk Professionals) Research Center. He coauthored Foundations of Banking Risk: An Overview of Banking, Banking Risks and Risk-Based Banking Regulation (Wiley 2009).