BFS Revision Session

What you need to know

1: The Modern Bank

Defining banks Accept Deposits, Make Loans etc.

Differentiating banks How Banks are different from (and are similar to) other

firms Types of Modern banks

Investment Banks Retail and Universal Banks

Issues Facing the Modern Bank Technology Global Economy etc.

2: Theoretical Concepts in Banking

Principal-agent problemAdverse selectionMoral hazard problemThe implications of the above to:

Relationship banking Arm’s length banking

Seminar: Discussed some of the finer points of AS and MH in other areas of banking

USA Important features, Structure and regulations of

the US commercial banking industry, Commercial banks consolidation, Thrift industry in USA, international banking

United Kingdom Overall structure, main features, retail banking,

wholesale banking, building societies and international banking

Germany Features, Commercial banks in Germany Saving

bank sector, Credit cooperative sector, Banks with specialised functions. Hierarchical StructureShift towards universal banking.

3: World Banking Structures

4: Management of Risk in Banking

Types of risk faced by the modern bank Credit Risk, Interest Rate Risk, Currency Risk

etc. Approaches to the management of specific

risks GAP analysis, Duration Analysis

Key risk management techniques Derivatives, asset securitisation

Seminar: Duration GAP analysis examples

5: Prudential Control in Banking

Arguments for prudential control / regulation Problems with external prudential regulations Prudential control and regulations in the UK

1979 Banking Act, 1987 Amendment to Act, Scottish Case for Free Banking

Contrast with USA ‘Tripod’, McFadden Pepper Act, Glass Steagall Act

etc. Seminar: MH, Deposit Insurance, Central

Banks etc.

6: Competitive Issues in Banking

Problems with output MeasurementEconomies of Scale and ScopeProductivity and Efficiency Measurement

DEA Theory

S-C-P vs Efficient Market HypothesisSeminar: Tests of the above for UK, USA,

Germany, France, Spain and Italy

7: Bank Failure

The need to study Bank Failure Defining Terms in Bank Failure

Crash, Panic, Run, Contagion Causes of Bank Failure

Goldstein and Turner (1996) Article Bank Failure Case Studies

Franklin National, CI & Penn Square, JMB Barings Banco Ambrosiano BCCI

The Exam

Exam is 08/06/2005 at 16:15.You have two hours to answer two

question from a choice of four.One topic per question.No repeat of in-class test material or

courseworkMay be a numerical element (bring a

calculator).

The Exam

Demonstration of further reading will be essential for all questions (Seminar Material and Textbook Chapters will provide good starting points).

If you missed anything, it can be downloaded from the following drive. L:\PBS\LectData\CoxJ\Semester 2\Banking and Financial

Structure

Good Luck