Capital and Liquidity Regulations, Resilience, and Bank Value

Capital and Liquidity Regulations, Resilience, and Bank Value

Md. Atiqur Rahman Khan
Copyright: © 2020 |Pages: 11
DOI: 10.4018/978-1-7998-1086-5.ch011
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In the business arena, particularly in the field of corporate finance, the scope of valuation is highly significant. There are several value drivers for a firm. However, due to its nature of business, a bank's valuation is affected by several unique drivers including earnings diversification, risk capabilities, assets mix, and a lot of intangible factors. Since banking is a highly regulated sector, this chapter is designed to address the missing links between Basel capital and liquidity regulations, banking system resilience, and bank valuation.
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Valuing A Bank

When valuing a bank, three matters are important. First, which valuation methods are appropriate for banks? Second, are any customization required for the standard methods for valuation; and third, on the basis of value drivers, how the customization be done? As outlined earlier, the shareholder value approach i.e. equity-based approach is better for baking institutions. However, the focus should be spotted on the value drivers. The key aspect of decision making in investment and asset management relies on a thoughtful study of the valuation as well as the sources of value. In addition to the fundamental factors, like, earnings, cash flows, revenue; business nature and risk-oriented factors are needed to be considered in the valuation.

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