Run by Bangor Business School

20.000 Credits or 10.000 ECTS Credits

Semester 1 & 2

Organiser: Prof Jon Williams

This double module examines the main theoretical and practical issues concerning banking business. In particular, the modules covers the theory of the banking firm by considering all aspects of the bank’s balance sheet in addition to regulation and structural issues that affect the bank’s strategic decision-making and risk behaviour. After completing the module, students should be familiar with how to measure, manage and maximise the bank’s value and have developed understanding of management strategies.

Introduction to the banking firm Business models and forces of change The regulation of banks Bank capital regulatory requirements Analysing bank performance Market structure and competition Business and consumer lending Diversification and managing non-interest income and non-interest expense Governance and compensation in banking Managing value at risk Asset Liabilities Management (ALM) Essentials of credit risk analysis Credit risk management Liquidity management Capital theory Capital management Managing the investment portfolio

excellent

A- to A* Excellent grasp of the concepts and techniques together with significant evidence of engagement and understanding of the research papers in this area.

threshold

D- to D+ Demonstration of the required knowledge and techniques but with significant mistakes and little development of the subject beyond lecture material.

good

B- to B+ Clear understanding of the subject, together with evidence of investigation and understanding of the research literature, but with some theoretical or practical minor errors.

C- to C+

C- to C+ Demonstration of the required knowledge and techniques but with mistakes and little development of the subject beyond lecture material.

1. Comprehend how credit risk and liquidity management methods are used by banking firms.

2. Analyse the role of interest and non-interest activities within a bank and their contribution to profit.

3. Understand the market forces and regulatory requirements that are changing the industry and understand the impact of market structure and competition in banking.

4. Analyse and understand the main theories and practices of modern bank capital management.

5. Determine the role of asset-liability management (ALM) process within a banking firm.

6. Evaluate the main theories and practices underlying modern banking.

Type	Name	Description	Weight
	Assignment 1		100.00

		Hours
Lecture	One 2-hour lecture per week.	20
Practical classes and workshops	Practical classes and workshops delivered through Blackboard.	28
Private study	Private study.	152

• Literacy - Proficiency in reading and writing through a variety of media
• Numeracy - Proficiency in using numbers at appropriate levels of accuracy
• Computer Literacy - Proficiency in using a varied range of computer software
• Self-Management - Able to work unsupervised in an efficient, punctual and structured manner. To examine the outcomes of tasks and events, and judge levels of quality and importance
• Exploring - Able to investigate, research and consider alternatives
• Information retrieval - Able to access different and multiple sources of information
• Inter-personal - Able to question, actively listen, examine given answers and interact sensitevely with others
• Critical analysis & Problem Solving - Able to deconstruct and analyse problems or complex situations. To find solutions to problems through analyses and exploration of all possibilities using appropriate methods, rescources and creativity.
• Teamwork - Able to constructively cooperate with others on a common task, and/or be part of a day-to-day working team
• Argument - Able to put forward, debate and justify an opinion or a course of action, with an individual or in a wider group setting
• Self-awareness & Reflectivity - Having an awareness of your own strengths, weaknesses, aims and objectives. Able to regularly review, evaluate and reflect upon the performance of yourself and others

• skills in recording and summarising transactions and other economic events; preparation of financial statements; analysis of the operations of business (for example, decision analysis, performance measurement and management control); financial analysis and projections (for example, analysis of financial ratios, discounted cash flow analysis, budgeting, financial risks)
• knowledge of theories and empirical evidence concerning financial management, risk and the operation of capital markets (in cases of degrees with significant finance content).
• Abstraction. From the study of economic principles and models, students see how one can abstract the essential features of complex systems and provide a useable framework for evaluation and assessment of the effects of policy or other exogenous events. Through this, the typical student will acquire proficiency in how to simplify while still retaining relevance. This is an approach that they can then apply in other contexts, thereby becoming more effective problem-solvers and decision-makers.
• Analysis, deduction and induction. Economic reasoning is highly deductive, and logical analysis is applied to assumption-based models. However, inductive reasoning is also important. The development of such analytical skills enhances students' problem-solving and decision-making ability.
• Quantification and design. Data, and their effective organisation, presentation and analysis, are important in economics. The typical student will have some familiarity with the principal sources of economic information and data relevant to industry, commerce, society and government, and have had practice in organising it and presenting it informatively. This skill is important at all stages in the decision-making process.
• Framing. Through the study of economics, a student should learn how to decide what should be taken as given or fixed for the purposes of setting up and solving a problem, i.e. what the important 'parameters' are in constraining the solution to the problem. Learning to think about how and why these parameters might change encourages a student to place the economic problem in its broader social and political context. This 'framing' skill is important in determining the decision-maker's ability to implement the solutions to problems.
• An appreciation of the nature of the contexts in which finance can be seen as operating, including knowledge of the institutional framework necessary for understanding the role, operation and function of markets and financial institutions (e.g. the economic, legal, regulatory and tax environment, both national and international; the firm; the capital markets and the public sector).
• A knowledge of the major theoretical tools and theories of finance, and their relevance and application to theoretical and practical problems (e.g. concept of arbitrage and examples of its use; financial mathematics and capital budgeting criteria; informational efficiency; optimal risk sharing; portfolio theory; asset pricing models and the valuation of securities; cost of capital; derivative pricing; risk management; information asymmetry; principal agency relationships; signalling; Fisher separation and capital budgeting criteria; behavioural finance; term structure and the movement of interest rates; determination of exchange rates and financial intermediation).
• An ability to interpret financial data including that arising in the context of the firm or household from accounting statements and data generated in financial markets. The interpretation may involve analysis using statistical and financial functions and procedures such as are routinely available in spreadsheets (eg Microsoft Excel) and statistical packages. It may assume the skills necessary to manipulate financial data and carry out statistical and econometric tests (e.g. estimation and interpretation of asset pricing models; financial modelling and projections; event studies and residuals analysis; elements of time series analysis, such as serial correlation mean reversion, and stochastic volatility).
• An understanding of the relationship between financial theory and empirical testing, and application of this knowledge to the appraisal of the empirical evidence in at least one major theoretical area. The appraisal should involve some recognition of the limitation and evolution of empirical tests and theory (eg the efficient markets hypothesis; anomalies; pricing of derivatives and other securities; bond portfolio management; exchange rates; raising capital and capital structure).
• An understanding of the financing arrangements and governance structures of business entities, and an appreciation of how theory and evidence can be combined to assess the effectiveness and efficiency of such arrangements (e.g. decisions as to sources of finance and financial structure; the pricing of corporate securities; the market for corporate control; corporate governance structures and mechanisms; financial planning and international dimensions of finance).
• An understanding of the factors influencing the investment behaviour and opportunities of private individuals (bonds, equities, and derivatives; risk aversion; risk/return trade-offs; portfolio management and performance measurement; pensions and long term savings; the tax treatment of savings and investments; international diversification; forex risk; objectives of and constraints on institutional investors and advisors).
• An understanding of financial service activity in the economy, and an appreciation of how finance theory and evidence can be employed to interpret these services (for example, information asymmetry, adverse selection and moral hazard could be employed to analyse the fundamental nature of services, such as insurance, pensions, bank lending and consumer credit, and also explore fundamental problems arising in such financial service provision. Efficient market hypothesis could be used to explore evidence for fund manager performance and the effectiveness of equity and bond saving services).
• An ability to understand financial statements, and a basic appreciation of the limitations of financial reporting practices and procedures (eg financial statement analysis; the relation between cash flow accounting and accrual accounting; discretionary accounting practices).
• Problem solving and critical analysis: analysing facts and circumstances to determine the cause of a problem and identifying and selecting appropriate solutions.

Resource implications for students

Students may want to purchase supporting text book.

Reading list

Bank Management, 8th ed. by Timothy W. Koch and S. Scott MacDonald. Published by Cengage Learning.

Introduction to Banking, 2nd ed. by Barbara Casu, Claudia Girardone and Philip Molyneux (2015). Published by Pearson.

Compulsory in courses:

• N322: BA Banking and Finance year (BA/BIF)

Optional in courses:

• N106: BSc Business Stud & Finance (Bangor International College) year 2 (BSC/BICBSF)
• NN1H: BSc Business Studies and Finance year 2 (BSC/BSFIN)
• NN1J: BSc Business Studies and Finance (4 year with Incorp Found) year 2 (BSC/BSFIN1)