New Economic School

MA in Economics

banking

Module 5, May-June2008

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 2 home assignments (30%) and final exam (70%).

Potential guest speakers

Alexander Morozov, Renaissance Credit, CFO

Ilkka Salonen, Renaissance Investment Management, President

Jochen Wermuth, Wermuth Asset Management, Founder/CIO

Igor Kouzin, DeltaCredit Bank, CEO

Course outline and readings

Week / Topic / Reading
1 / The functions of banking
  1. Functions of banks and banking system
  2. Role of central banks
  3. Banking system regulation and supervision
  4. Bank lending and its problems
  5. Deposit insurance system
  6. Credit bureaus
  7. Bank crisis around the world
  8. Russian banking sector overview: major players and tendencies
/ [7]
2 / Major activities of a commercial bank. Finance perspective
  1. Major activities of a commercial bank
  2. Organizational structure of a bank
  3. Assets and liabilities, off-balance sheet items
  4. Balance sheet report, income statement, cash-flow statement
  5. Financial indicators
/ [1] introduction, 1
additionally:
[2] 1,2
3 / Money and foreign exchange market
  1. Yield curve structure
  2. Interbank deposit and REPO market
  3. Fixed income instruments
  4. Forwards, futures, interest rate swaps
  5. Margin accounts, risk mitigation
  6. Regulation
/ [8]
4 / Banking risks
  1. Risk management
  2. Major types of risks
  3. Capital adequacy ratio
  4. Market risk. VaR
  5. Credit risk. Rating systems
  6. Operational risk
  7. Business risk
  8. Statistical analysis of risk
/ [1] 2,3,6,7
additionally:
[1] 4,5
[2] 26,27
[3] pp. 1-3, 17-18
[4] pp. 1-8
5 / Bank capital
  1. Basel II framework
  2. Regulatory capital vs economic capital
  3. Capital allocation and risk-adjusted performance measurement
  4. Capital adequacy ratio management
  5. Asset securitization
/ [6] pp. 1-17, 23-30
6 / Liquidity and interest rate risk
  1. Liquidity of financial institution
  2. Liquidity risk assessment: GAP analysis, cash flow analysis, liquidity indicators
  3. Central Bank obligatory ratios
  4. Liquidity risk management
  5. Sources and reserves of liquidity
  6. Interest rate risk measurement
  7. Hedging interest rate risk and derivatives
/ [2] pp.211-225, 247-279
7 / Pricing within banks
  1. Funds transfer pricing systems: internal transfer rates, internal bank, mismatch income
  2. Product profitability assessment
  3. Shareholder value improvement
/ [1] 26,27, 51-54

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