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Can a bank be both profitable and fragile at the same time? The uncomfortable answer is yes.
Banks do not fail simply because they take risks. They fail when those risks are mispriced, under-compensated, and allowed to accumulate over time.
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.
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 banking: sustainability and viability.
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.
Antonio Mota Pizzaro is the CFO of a Spanish financial institution within the Caja Rural Group, responsible for Asset and Liability Management, Financial Planning and Treasury. Prior to this he worked in credit risk modelling and analysis at various Spanish financial institutions. He holds a degree in Business Administration from the University of Extremadura, and obtained his PhD in Economics from the Autonomous University of Madrid, for which he was awarded the Extraordinary Doctorate Prize. He is an adjunct lecturer at the Comillas Pontifical University, where he teaches the Banking module on the Master’s programme in Financial Risk Management.