Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

1. Overall bank level

As is the case for any corporation listed on a stock exchange, shareholders want to ensure that the value of their shares exceeds the amount of money invested in the company (the equity). Technically, this implies that the long-term return on equity should exceed the cost of equity demanded by the market. This cost is estimated by the opportunity return that is available to shareholders investing in other financial instruments.