All banking activities may be included in two different categories: banking book and trading book. The banking book includes the banking activity (lending and borrowing money, holding and issuing securities and gathering deposits) aimed to generate earnings from a cash flow by selling assets occasionally, but not with a significant turnover. As opposed to the banking book, the trading book includes all the trading activities of a bank. The distinction between banking and trading book is problematic from a technical point of view and it has never been formalized. However, the definition of the limits of the banking book is extremely important for the purpose of organizational and risk management. Indeed more attention has been paid to the problem in the context of the Basel agreements in order to determine the capital requirement for banking supervision purposes.
Editor : Bianca GIANNINI