CONTEMPORARY ISSUES AND TOOLS IN ECONOMICS
Learning outcomes of the course unit
a) Knowledge and understanding of: recognize opportunities brought about by the dramatic changes that have occurred in the past decade in the banking industry; the main problems related to the bank management (asset/liability management, risk management); the banking regulation system.
b) Ability to apply knowledge in order to: apply basic finance concepts to help in the decision making framework at managing financial institutions; understand the risks associated by the unique position that banks hold as a recipient of funds, and how to effectively manage them.
c) Ability to integrate knowledge and handle complexity, and formulate judgements with incomplete or limited information in order to: choose financial instruments appropriate for managing the banks’ risks.
d) Students will have the ability to communicate their conclusions and the underpinning knowledge and rationale to financial operators as well as to non-specialist audiences using a proper technical language.
e) Since a problem solving approach will be adopted, together with the analysis of case studies, students will learn to study in a largely selfdirected and autonomous manner.
Basic knowledge of financial mathematics. Suggested reading: D. Luenberger, "Investment Science", Oxford University Press, 1998, Chapter 2 "The Basic Theory of Interest".
Course contents summary
This course aims to help students understand the role and responsibilities of executives at banks and other financial institutions. We will examine the practices, procedures, traditional and state-of-the-art techniques and tools to manage a commercial bank. Particular attention is paid to current and future trends in banking, but analysis of the existing forces and changes in current banking will be examined along with recent changes in the Italian financial markets as well as the Italian capital markets as well as the US market. Emphasis will be made in the analysis of the following issues:
• The banking industry today and its changing environment.
• Assets, liabilities, and principles of bank management.
• Fundamentals of bank regulation.
• Banking risks and risk management, with a particular focus on credit risk.
L1. An Overview of Banking & the Changes in Financial – Service Sector.
L2. The Financial Statements of Banking and their Principal Competitors
L3. Measuring and Evaluating the Performance of Banks & their Principal Competitor
L4. Risk Management for Changing Interest Rates: Asset – Liability Management.
L5. Risk Management: Financial Futures, Options, Swaps & Other Hedging Tools
L6. Risk Management for Changing Interest Rates: Hedging using Duration Techniques
L7. The Investment Functions in Financial – Services Management & Liquidity, Reserve Management – Strategy & Policies
L8. Managing and Pricing Deposit Services
L9. Investment Banking, Insurance, and Other Sources of Fee Income Managing Nondeposit Liabilities
L10. The Management of Capital. Regulatory Capital
Topics to be covered in this subject will be centered around relevant textbook chapters. Lecture notes will provide students with major issues in banking & financial institutions. Additional materials may be provided to help students understand subject matters.
Peter Rose & Sylvia Hudgins. "Bank Management & Financial Services", 8th Edition. New York, 2010.
Lectures, exercises, discussions/presentations and analysis of specific cases based on newspaper articles.
Assessment methods and criteria
The intermediary reports should be written in maximum 5 pages and the final report should be written in 20-25 pages, Time News Roman font and size 12. Your group can study any banks: Italian, Vietnamese, US or France..(not exhautive)
The content should cover some main points as below:
• Introduction to bank structure (bank type, Board of Directors, Executives Boards, History, Subsidary banks; Main services of bank (Task 1).
• Analysis of bank performance (Task 2).
• Analysis of bank risks: Interest rate risks (Task 3).
• Analysis of bank capital: risk weighted assets components, CAR ratios, Tier 1, 2 Capital (Task 4).
This analysis will follow the theories, scheme given in the lectures and tutorials.
Can be done in group maximum 4 students.
Written exam (online). Knowledge and understanding, the ability to study in a largely autonomous manner, the ability to formulate judgements with incomplete data, and the ability to communicate conclusions. The application of knowledge and understanding through problem solving abilities in new or unfamiliar environment.
It will be a two-hour written examination. Final exam format will be discussed during revision in the last week of the semester.
During the exam devices such as smartphones, smartwatches, tablets, etc. are strictly forbidden. The final grade is published on Esse3.
Midterm Exam MCQs only (online)
1. Midterm Exam – 30%
2. Report (4 Tasks) – 40% - Final Report – Self group assessement students
3. Final Exam – 30% - Written or Oral (in case less than 5 students)