Economics of Banking

Module description

Summary:

In this module you will focus on the microeconomics of banking and financial contracts, bank crises and regulation, and various issues regarding the banking sector. By the end of the module you should be able to respond to questions such as: What is the role of banks in consumption smoothing? How do banks hedge against risk? How are banks regulated? What are the causes of a banking crises and the response of the government? What causes bank runs and can they be avoided?

Additional Information:

Internationalisation

The content of this module is relevant across countries as it relates to banking crisis situations and the banking sector.

Employability

Students gain a deep knowledge and understanding of the role and purpose of financial institutions in a theoretical context and are able to apply this knowledge to practical situations. Also, they develop their writing, numerical, analytical and research skills which are all valuable to employers in the banking sector.

Sustainability

All of the resources for this module are available on the ELE (Exeter Learning Environment).

Full module specification

Module title:Economics of Banking
Module code:BEEM119
Module level:M
Academic year:2016/7
Module lecturers:
  • Dr Pradeep Kumar - Convenor
Module credit:15
ECTS value:

7.5

Pre-requisites:

None

Co-requisites:

None

Duration of module: Duration (weeks) - term 2:

11

Module aims

The focus of this module is the microeconomics of banking and financial contracts, bank crises and regulation, and aims to cover various issues regarding the banking sector including. The module aims to provide students with the necessary background for them to answer the following questions

1. Why do banks exist?

2. What is the role of banks in consumption smoothing?

3. How did regulation in the banking sphere change in response to managerial incentive problems?

4. How do banks hedge against risk?

5. How are banks regulated and what is the optimal regulation of banks?

6. What are the causes of a banking crisis and what is the response of the government?

7. What causes bank runs and can they be avoided?

ILO: Module-specific skills

  • 1. able to explain and analyze the role and functioning of a bank in modern economy
  • 2. describe the different forms of market structure in banking industry and explain their implications
  • 3. analyze and use the different tools and instruments used by banks
  • 4. analyze the role of asymmetric information and strategic interactions
  • 5. identify the role of banks in a financial crisis, both as a cause and how it may help to avert one
  • 6. recommend policy for regulation of banks

ILO: Discipline-specific skills

  • 7. apply strategic reasoning to understand the role of the banking and the financial sector
  • 8. apply asymmetric information modelling to banking sector
  • 9. ability to comprehend analytical models as well as empirical studies and setting and solving simple microeconomic models

ILO: Personal and key skills

  • 10. demonstrate written communication skills
  • 11. demonstrate problem solving skills

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad
221280

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Contact hours22Lectures

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Homework in form of exercises and short questions1-2 exercises per week1-7 Verbal feedback, Solutions for exercises will be posted on ELE

Summative assessment (% of credit)

CourseworkWritten examsPractical exams
25750

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Homework251 problem set with 10-20 questions.1-11Written
Examination752 hours1-11 Written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Homework and Examination2 hours Examination (100%) 1-11Aug/Sept

Syllabus plan

1. What is a bank, and what do banks do?
2. Why do financial intermediaries exist?
3. Modelling the banking sector
4. Lender-Borrower relationship
5. Industrial Organisation of Banking
6. Bank crisis and Bank Runs
7. Bank regulation.
 

Indicative learning resources - Basic reading

Basic reading:

 

Matthews, Kent and Thompson, John. The Economics of Banking. Wiley (Second Edition). (R)


Greenbaum, Stuart and Thakor, Anjan. Contemporary Financial Intermediation. Dryden Press (Second Edition) (R)


Ball, Laurence. Money, Banking, and Financial Markets. Wiley (2005). (R)

NOTE: (R) is a recommended text , while (E) is essential reading. Further reading lists will be issues for each topic.

Module has an active ELE page?

Yes

Origin date

03/09/2007

Last revision date

19/08/2016