Finally, a great reference book on banking!

“Modern Banking, by Professor Shelagh Heffernan”

Have you been wondering if there is that one book that you should purchase that is part commentary, part dictionary, part history and part text book on the banking and financial services industry? I think that I have found it, and it is called “Modern Banking, by Professor Shelagh Heffernan” published by Wiley and Sons (ISBN 10: 0-470-09500-8 ISBN: 13-978-0-470-09500-3).

I think that over time, there have been several poor attempts to explain the financial services in a comprehensive manner that is not too technical, and yet clear enough in a way that you and I as people in the industry can use it on an every day basis, and might I add, in an authoritative manner.

Many of the books on banking, fund management, private banking, corporate banking – just financial services in general – are particularly bad. They are either too quantititive or too qualitative, and the industry is really a bit of everything.

There were several attempts at books on banking by an American guy called Martin Meyer, of which I have one on my shelf at home called “The Bankers”, which I thought were very poorly conceptualised, but which I had no choice but flip through sometimes. It’s been sitting on my shelf for years, and has been a source of meditation for me in trying to come to terms with what was so bad about it and why there were no alternatives.

He is now viewed as the “expert on banking” in his circles in the US because, well, only because his books are thick with pieces of information upon pieces of information, all leading nowhere, or meaning nothing. Something like a very bad Alvin Tofler or John Naisbitt, both futurists whose books read like an inventory of what the future will hold. Tofler and Naisbitt are alright for what they do, and in a way, when Tofler wrote Future Shock (I think in 1968?), he was pioneering new thinking about the future and so even if his earlier books appeared raw, it was understandable. Meyer on the other hand, is almost a non-starter when it comes to thinking about the future of the financial services industry, although that is what he claims to do.

The bottom of the lot should certainly be any book by a guy called Tan Chwee Huat in Singapore which for many years was the only text book available on banking for universities in a city that is supposed to be a financial center. How this academic got away with writing a terrible book that was reprinted almost 20 times is an indication of the rubbish that sometimes exists in Singapore’s intellectual environment.

As long as you are a fellow “Singaporean” (please allow me a little bit of venting here because this genre is not as sophisticated as they would like to think themselves to be, and should not be allowed to get away with it) who is in a field that nobody else is bothering about, your fellow “Singaporeans” in academia, in government and in the banks, basically indulge you, and that is what provided for this man’s unimpressive career. It is one of the wonders of this universe that there is a small island that stands taller than all of its neighbours, but is also the hiding place for intellectual lightweights as long as they are “one of us”.

This guy must be retired by now, but I am so very unimpressed by someone who could have managed a lifetime’s career on such sub-scale work. Just take a look at his book “Financial Markets and Institutions in Singapore” if you get the chance and you will see what I mean – the later editions of this book are progressively worse than the earlier ones! It’s like nobody was reading his book, but everybody was buying it as a university text book.

I too have been thinking about writing a book on the major trends in the financial services industry, and in fact, was offered money by Wiley and Sons to do just that. But I still have not got off the ground because I am still putting the pieces together for The Asian Banker as a business. When I am less distracted in the hopefully near future, I will write something that I would hope is relevant. Just scanning around all the books that exist, I would not want to publish something that replicates other better books.

As I am not an academic, my book has to be conceptually usable for practitioners. That is why when I saw Professor Heffernan’s book, I said to myself, well, at least the best textbook has now been written, and so I should focus on something that reads more like an improved version of a futurist perspective of this industry. Other industries have good and well developed futurist books – I remember one called “Inside the Tornado” by Geoffrey Moore, a very talented ideas man, who also wrote…. “Crossing the Chasm”… or something like that. I think that writers like Moore helped the technology industry people really think through how they were going to ride the tremendous forces of change taking place in their industry, especially in the late 1990s.

In fact, the person who introduced Inside the Tornado to me was Remy DeTonnac, who at that time was the CEO of Gemplus for Asia. I think amazingly, just looking at the changes that took place to Remy’s own career and to Gemplus and it’s founder and everyone else associated with it, it was an industry where the professionals had to hang on for dear life as they were swept away by the tornado.

I want to write exactly that kind of book for the financial services industry because that is the amount of change that is expected to take place in the next few years, and I hope my book will be a book in its time.

The great feature about Professor Heffernan’s book is that she puts the definitive ideas in the financial services industry today within its historical context, without losing any of its technical depth. In that regard, she does prepare us for the future by describing the past accurately. I think she spent a lot of time getting the table of contents right, because it properly conceptualises all the key elements of the industry in the context of key themes as we know them to be today. This is how her TOC reads – beautiful isn’t it!:

1.What are banks and what do they do
2.Diversification of banking activities
3.Measurement of risks in banking
4.Global Regulation
5.Bank Structure and Regulation
6.Banking in Emerging Markets
7.Bank Failures
8.Financial Crises
9.Competitive Isues in Banking
10.Case Studies

Don’t let the chapter titles fool you, because when you look into each chapter, the discussions are not macro, but at street level, about products, about risk management calculations and the whats and the whos and the whys. That’s why it is beautiful.

From her CV, we know that Professor Shelagh Heffernan is currently Professor of Banking and Finance at Cass Business School, City University, London. Modern Banking is her fourth book. I am trying to get my hands on her paper called, ‘How do UK Institutions Really Price their Banking Products?’ published in the Journal of Banking and Finance. It was chosen as one of the top 50 published articles by Emerald Management Review.

PS: My own staff reading this will know that it is a career enhancing move to get your own copy of this book as required reference material along with all the others I have prescribed previously. cheers guys!


Comments

  1. SHONEYE JUBRIL ADEDAYO

    CAN YOU PLEASE GIVE DETAIL ON EACH TEXT BOOK BEST FOR BANKING AND FINANCE STUDENT.

  2. Persevering to try and catch up on all the posts on this blog is paying dividends!

    Sounds like the perfect instructional for someone trying to learn about the financial services industry and his target clients. Brilliant!

    Tks! Happy holidays!

  3. Shoneye, please tell me exactly what year you are in and what area of banking you are interested in and let me see if I have come up with something. tx ED

  4. hi ed (didn't realise the double entendre till i wrote this!), i've been browsing through your delightful blog on-and-off and just came across this post. has there been a better reference book on banking since (dec 06)?
    do keep writing! though i may not agree with everything u write (but of course), i really enjoy your insightful postings. cheers

  5. hi Kelvin, great question actually. The way I would treat the question of good banking books is to still have a very good basic reference to understand the historical context of banking as we know it today. I would still recommend Heffernan's book as he primer. But given what is happening today, you will need to augment that with a very selective list of books that can add to your sense of where everything is going. There is very little institutional reform underway today, even if everybody is talking about it. So there are no textbooks current enough until the reforms are history. The books that I am reading now to strengthen my sense of the current markets that are causing global turmoil, are “Inside the House of Money” (2006) by Steven Drobny and an old book A Short History of Financial Euphoria by John Kenneth Galbraith (1990). You may be surprised that these are not one of those hot-off-the-press nonsense that purport to describe what is going on. It is always important to anchor our assessment of banking and the economy on the fundamentals of the human propensity to act as they do. Reading Galbraith's Financial Euphoria for example, will bring home to you how little anything has changed in the way speculators (I am talking about institutional speculators) and markets behave. There is nothing in today's oversold and illiquid credit default swap market that are not based on the same principles as what happened in the aftermth of the Dutch tulip mania in the 17th century, the south sea bubble, John Law, and more recently Miliken (remember him in the 1980s?). Galbraith argues that most of these seeming innovations were essentially variations on the theme of leveraging. Even the theme of emerging markets is not a new one, it goes back to 1837! Having said that, Drobny's book is important because I needed to strengthen my understanding of how hedge funds leverage to profit from global markets. Some chapters of this book I have had to read several times to understand what actually happens during some of these trades. Not that they are done by extremely smart people. At the end of the day, they are gamblers, extremely high risk takers who use technical analysis to justify their bets. In the realm of unlisted trades between counter-parties instead of in a transparent market, it is all about confidence and calling the bluff and this book describes the mindsets of some of these traders ver clearly. Sophisticated as it may seem, the fundamental assumptions made are all the same as existed 200 years ago. Which brings us back to how all this affects the realm of organic and commercial banking. We are in a sense in virgin territory here. In as much as concepts like Enterprise Risk (ala risk metrics) and Basel II have brought some discipline into commercial banking, the industry now has to take into account how markets can affect its balance sheet. The industry also has to define some inalienable truths about assumptions about what should be on the books and off-balance sheet. Nobody authoritative has written such a book yet. The Americans are currently just confusing the issue by all the shouting and screaming that is taking place between the Feds and the US government about what “greater scrutiny” should mean. In the end, making the Feds more responsible for markets is mad. The lessons on what should be done already exists, if we read the two books I mentioned.

  6. sandeep singh jamwal(india)

    CAN YOU PLEASE GIVE DETAIL ON EACH TEXT BOOK BEST FOR BANKING AND FINANCE STUDENT.

  7. It is a great pleasure to tell you that your article has fascinated me. You are into a wonderful work. Keep the spirit high.And yes i have bookmarked your site http://www.asianbankerforums.com .

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