FIN41670 Banking & Financ Institutions

Academic Year 2023/2024

Banks are unique institutions. They are the guardians of the traditional payment system used by all of us on a daily basis. They act to “grease the wheel” of commercial activity across the entire economy, smoothing consumption and investment over the lifetime of households and firms, intermediating funds to borrowers from agents with savings, creating liquidity through lending. However, given their central role in all of our economic lives, they are also potentially fragile institutions. They transform liquid deposits into long term investments such as loans and securities. They are highly leveraged. Given the maturity mismatch inherent between their loan and deposit books along with the “fractional reserve” nature of their balance sheet, they are permanently at risk of a “bank run”, where the amount of liquid assets available cannot meet the claims of all depositors. On top of all of this, banks are interconnected to the rest of the economy to such a degree that, when banking crises occur, systemic economic crises with prolonged aggregate effects usually ensue.

This module aims to provide students with fundamental principles of banking. Students will learn about the unique nature of banks, the structure of their balance sheet, and the economics of financial intermediation. Upon this core understanding, we will build up an understanding of the ways in which regulators try to reduce the riskiness of the banking sector, to mitigate the risk of bank failures and systemic crises. This will include a historic view on the pre-crisis regulatory environment (“Basel one and two”) as well as the post-financial-crisis regulatory response.

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Curricular information is subject to change

Learning Outcomes:

On completing this module, students are expected to be able to:
1. Understand the role and functions of banks and financial institutions and how these have evolved over time.
2. Appreciate the importance of banking for macroeconomic outcomes.
3. Discuss how external forces, including internationalisation, technological change and regulation influence the shape and configuration of the banking industry.
4. Understand the forms and relative merits of regulation and supervision.
5. Appreciate the causes and consequences of banking crises.
6. Analyse, measure and understand approaches to competition in banking.
7. Conduct research into issues related to the banking industry.

Indicative Module Content:

Topic 1: Money and the Financial System
Topic 2: The Economics of Financial Intermediation
Topic 3: Bank Balance Sheets and Bank Risks
Topic 4: Banking Crises
Topic 5: Real Economic Effects of Banks
Topic 6: Bank Regulation and Supervision
Topic 7: Central Banks, Monetary Policy, and Financial Stability

Student Effort Type Hours
Lectures

24

Specified Learning Activities

54

Autonomous Student Learning

80

Total

158

Requirements, Exclusions and Recommendations

Not applicable to this module.


Module Requisites and Incompatibles
Not applicable to this module.
 
Assessment Strategy  
Description Timing Open Book Exam Component Scale Must Pass Component % of Final Grade
Group Project: Group presentation and handout Unspecified n/a Graded No

40

Essay: Individual Essay Unspecified n/a Graded No

60


Carry forward of passed components
Yes
 
Resit In Terminal Exam
Autumn No
Feedback Strategy/Strategies

• Group/class feedback, post-assessment
• Online automated feedback

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