New Economic School

MA in Economics

banking

Module 5, May-June2010

Instructor: Dzhangir Dzhangirov (dzhangir-at-gmail.com)

Summary

This course discusses practical aspects of functioning of banks and banking systems. It considers international practices and their applications to Russian banks. It will be valuable for students planning to work within a commercial bank or bank credit/equity analysis sector as well as for students planning to make research in macroeconomics and/or role of banking sector in macroeconomics.

Course materials

  1. Risk Management in Banking 2nded., Joel Bessis
  2. Bank Asset and Liability Management, Moorad Choudry
  3. International Convergence of Capital Measurement and Capital Standards, BCBS, 1998 (Basel Capital Accord, July 1988, updated to April 1998).
  4. Amendment to the Capital Accord to Incorporate Market Risks, BCBS, 1996
  5. International Convergence of Capital Measurement and Capital Standards. A revised Framework, BCBS, 2004
  6. Overview of The New Basel Capital Accord, BIS, 2001
  7. Economics of Money, Banking, and Financial Markets, Frederic S. Mishkin
  8. Options, Futures and Other Derivatives 6th ed., John C. Hull
  9. Value at Risk, Philippe Jorion

Course requirements and grading

The course grade is made up of home assignment (30%) and final exam (70%).

Guest speakers

The course will include presentations of guest speakers from banking industry.

Course outline and readings

Week / Date / Topic / Reading
1 / May 14 / The functions of banking
  1. The role of banks in macroeconomic framework
  2. Fractional-reserve lending
  3. Banking system regulation
  4. Russian banking sector overview: major players and tendencies
  5. Bank crisis around the world
/ [7]
2 / TBD / Major activities of a commercial bank. Finance perspective
  1. Organizational structure of a bank
  2. Activities of a commercial bank
  3. Assets and liabilities, off-balance sheet items
  4. Balance sheet report, income statement, cash-flow statement, financial indicators
/ [1] introduction, 1
additionally:
[2] 1,2
3 / TBD / Money and foreign exchange market
  1. Yield curve structure
  2. Interbank deposit and REPO market
  3. Fixed income instruments: cash-flows, duration
  4. Interest rate derivatives
/ [7], [8]
4 / TBD / Banking risks
  1. Major types of risks
  2. Capital adequacy ratio
  3. Basel I, Central Bank of Russia framework
  4. Capital arbitrage and adverse selection
/ [1] 2,3,4
additionally:
[2] 26,27
[3] pp. 1-3, 17-18
[4] pp. 1-8
5 / TBD / Bank capital
  1. Basel II framework
  2. Regulatory and economic capital
  3. Capital allocation and risk-adjusted performance measurement
  4. Capital adequacy ratio management
  5. Asset securitization
  6. Failure of existing concepts in 2007-2008
/ [6] pp. 1-17, 23-30
6 / TBD / Liquidity risk
  1. Liquidity of financial system
  2. Bank runs and deposit insurance system
  3. Liquidity of financial institution: GAP analysis, cash flow analysis, liquidity indicators, sources and reserves of liquidity
  4. Central Bank obligatory ratios
  5. Liquidity risk management
  6. Liquidity failures around the world
/ [1] 5
[2] pp.211-225, 247-279
7 / TBD / Asset Liability Management
  1. Funds transfer pricing: internal transfer rates, internal bank concept, mismatch income
  2. Product, business-line profitability assessment
  3. Interest rate risk measurement
  4. Hedging interest rate risk
/ [1] 26,27, 51-54

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