Strategic Management of Profitability in Banking from an Asset-Liability View

<p>Can a bank be both profitable and fragile at the same time? The uncomfortable answer is yes.</p><p>Banks do not fail simply because they take risks. They fail when those risks are mispriced, under-compensated, and allowed to accumulate over time.</p><p>This book introduces Pricing Gap as a new analytical framework that moves beyond the traditional accounting view of banking. It argues that asset and liability management (ALM) should not be a passive control function, but a proactive engine at the heart of balance-sheet strategy. With a common methodology linking supervision, stress testing and strategic planning, Pricing Gap offers a powerful new lens through which to understand the resilience of banks.</p><p>Through its discussion of fund transfer pricing, the book reveals the hidden gap between the prices embedded in a bank’s balance sheet and the risk-based prices required to sustain its business model over time. From this gap emerge two decisive concepts for modern bankin sustainability and viability.</p><p>Combining insights from banking crises, capital regulation, macroprudential policy, business model analysis, stress testing and strategic planning, this book challenges a central assumption of today’s regulatory debate: more capital alone is not enough. Without sound pricing, capital can absorb losses, but it cannot prevent fragility.</p>