Faculty of Business, Environment and Society

1 Faculty of Business, Environment and Society M22EFA International Banking 2015/16 (September 2015/16 Cohort – 1 st Semester 2015/2016 Delivery) TEACHING PLAN 1. The course comprises ten lectures and seminars, as well as one revision session. Each lecture is two hours long and takes place on Wednesday afternoons from 13.00-15.00. Seminars take place the next day. 2. The material to be covered in each session is summarized as follows: Date Topic Key Readings (available on Moodle) 30th Sept. Introduction / Financial intermediation Haldane, A. (2012) ‘ A leaf being turned’, speech given on socially useful banking, 29th October 2012 Akerlof, G.A. (1970) ‘The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism’, Quarterly Journal of Economics, 84(3), 488-500. 7 th Oct. Bank risk management Laeven, L. and Valencia, F. (2012) ‘Systemic Banking Crises Database: An Update’, International Monetary Fund Working Paper, WP/12/163. 14th Oct. Theory of the banking firm Anginer, D, Demirguc-Kunt, A. and Zhu, M. (2014) ‘How does competition affect bank systemic risk?’ Journal of Financial Intermediation, 23, 1-26. Sealey, C.W. & Lindley, J.T. (1977) ‘Inputs, outputs and a theory of production and cost at depository financial institutions’, Journal of Finance, 32, 1251-66. 21st Oct. Competition & stability in banking Fiordelisi, F., Marques-Ibanez, D. and Molyneux, P. (2011) ‘Efficiency and risk in European banking’, Journal of Banking and Finance, 35(5), 1315-1326. 28th Oct. Efficiency measurement in banking Berger, A.N. and Humphrey, D.B. (1997) ‘Efficiency of financial institutions: an international survey and directions for future research’, European Journal of Operational Research, 98, 175-211 Fethi, M.D. and Pasiouras, F. (2010) ‘Assessing bank efficiency and performance with operational research and artificial intelligence techniques’. European Journal of Operational Research, 204, 189-198 2 4 th Nov. International banking Robert Z. Aliber (1984), “International Banking: A Survey”, Journal of Money, Credit and Banking, Vol.16, No,4, pp.661-678 11th Nov Banking and Financial Products Dennis Haensel and Jan Pieter Krahnen (2007), “Does Credit Securitization Reduce Banking Risk? Evidence from the European CDO Market” 18th Nov. Credit Portfolio Management Arnoud W.A Boot (2000), “Relationship Banking: What Do We Know?”, Journal of Financial Intermediation, pp, 7-25 René M. Stulz (2009) Credit Default Swaps and the Credit Crisis”, NBER Working Paper No. 15384 25th Nov. The Banking crisis Eichengreen, B (2009), “How the Subprime Crisis Went Global: Evidence From Bank Credit Default Swap Spreads”, NBER, Working Paper 14904 Michael D. B (2008), “An Historical Perspective on The Crisis Of 2007-2008”, NBER Working Paper 14569 2 nd Dec. Global Banking regulation / The Basel Accords Asli Demirgüç-Kunt and Enrica Detragiache (2009), “Basel Core Principles and Bank Soundness: Does Compliance Matter?”, The World Bank Development Research Group Finance and Private Sector Development Team 9 th Dec. Revision 3. The references provided as key readings given are essential. For students who have not studied banking before it will also be necessary to undertake background reading from one of the recommended textbooks in the course outline. Specific chapter references may be given during the lecture sessions. Additional references may be provided during the lectures and these should also be considered essential reading for the course. There will be opportunities at lectures and seminar sessions for discussion of the key readings. So it is important that students make every attempt to keep up to date with these primary references. 4. In addition there are a number of websites that should be monitored on a regular basis. Given the rapidly changing nature of global banking systems and banking regulation it is important that students are aware of recent developments and can refer to them if necessary, in the examination or in their course work. Important websites that should be monitored include: 3 Bank of England www.bankofengland.co.uk Particularly useful for working papers and Financial Stability Reports Bank for International Settlements www.bis.org Useful for updates on Basel III and working papers European Central Bank www.ecb.int Good working paper series European Banking Authority www.eba.europa.eu Recently established to oversee European financial regulation Office of the Comptroller of the Currency: US Department of the Treasury http://www.occ.gov/topics/capitalmarkets/financialmarkets/trading/derivatives/derivatives -quarterly-report.html Provides Quarterly Report on Bank Derivatives Activities of top 25 Banks in the US Financial Conduct Authority www.fca.org.uk Useful for consultation and discussion papers Board of Governors of the Federal Reserve www.federalreserve.gov Vast amount of US banking and economic related information Federal Reserve Bank of New York www.newyorkfed.org A lot of useful US banking material Financial Stability Board www.financialstabilityboard.org Monitors progress in global financial regulation – some interesting issues papers International Journal of Central Banking www.ijcb.org/ Quarterly Journal of Banking issues Northcote Internet Limited http://www.northcote.co.uk/company_ links/alpha.asp?SIT=1&ALR=B Provides links to Annual and Interim reports, dividends and company information on UK listed companies. Yahoo Finance https://uk.finance.yahoo.com/q?s=%5 EFTSE Provides information and links to historical prices of UK listed firms 4 5. Coursework Assignment For the coursework element of the assessment you are required to write around 2,000 words in answer to ONE of the following: 1) Discuss (i) the impact of increasing competition in commercial banking on systemic risk and (ii) consider the possible implications of this for policy makers. 2) Discuss (i) the use of financial derivatives by banks to manage their asset and liability positions and (ii) investigate the extent to which credit derivatives vis-à- vis other types of financial derivatives are used by banks to reduce the risk of exposure to changes in market prices or rates that may affect their profits and shareholders’ wealth. The coursework must be handed in on Friday, 4th December, 2015. The recommended textbooks and additional reading provide background materials for these topics. However, students are also encouraged to undertake a literature search to find further papers on the chosen subject. The websites mentioned earlier, all contain information on themes relating to these topics. Learning Outcomes This coursework assesses the following learning outcomes. Students should show evidence that they have: 1) Provided an in-depth analysis of the concept identified in the first part of the question; 2) Provided an in-depth critical discussion of the policy issues in relation to the second part of the question; 3) Critically reviewed the literature using as a basis the references provided in the Moodle; 4) Shown initiative in identifying and analyzing other important references relating to the chosen subject.