Contents |
Course Title
Regulation and Supervision of Financial Risks
Course Code
IAM 543
Credit
(3-0)3
Prerequisites
Interest in financial risk, banking, financial markets & institutions, knowledge on Excel-based applications
Content
First 4-5 weeks
- Why do banks exist? Traditional theory of banking.
- Banks and financial intermediation.
- The rationale for regulation. Regulation of banks. Why regulate?
- Banking risks and management of risks in banking.
- Key financial risks
- How to measure and manage risks
- Financial derivatives and risk management
- Market, credit and operational risks
- IT Risk (Audit)
- Model Risk
- Why regulate financial risk?
- How to audit/supervise financial risks?
- International Regulatory & Supervisory Framework
- Basel-I, Basel-II
- Internal Controls and Risk Management Systems
- Establishing Risk Control Systems
- Risk Management and Measurement Systems.
- Internal Control Systems
- Recognition and Measurement of Risks
- Dealing with Unexpected Events and Extremes
- Stress tests
- Scenario analysis (event risk)
- Risk data, risk reporting and use of risk information
- Why banks fail? Case Studies on Financial Scandals & Financial Crises
- BCCI, Barings, Orange County, Metallgesellschaft, LTCM, Allied Irish Bank, National Australian Bank
- Several DVD and VCD shows will support the course.
Following Weeks
Risk Measurement
Excel Based Applications Conducting Research in Banking and Finance (Project) What is it for? Selecting a topic. Resources. Getting the data. Choice of software. Presentation.
Aims
This course is concerned with recent developments in the regulation and supervision of banking risks with special reference to Basel II within a regulatory and supervisory context. The course also aims to provide a rigorous account of issues on financial scandals with a special reference to banking. Finally the course aims to equip students with a rigorus understanding and application of financial risks within an Excel-based calculation environment.
Learning Outcomes
Suggested Textbooks
- Modern Banking in Theory and Practice, Shelagh Heffernan, Wiley, 1996
- Modern Banking, Shelagh Heffernan, Wiley, 2005
- Bank Management & Financial Services, Peter S. Rose – Sylvia C. Hudgins, McGraw Hill, 2005
- Financial Institutions Management: A Risk Management Approach, Anthony Saunders – Marcia Millon Cornett, McGraw Hill, 2003
- Commercial Bank Financial Management, Joseph F. Sinkey, Jr., Prentice Hall, 1998
- Regulating Finance: Balancing Freedom and Risk, Tommaso Padoa-Schioppa, Oxford, 2004.
- Financial Regulation, why, how and where now? Charles Goodhart et al., Routledge, 1998
- Internal Credit Risk Models: Capital Allocation and Performance Measurement, Michael K. Ong, Risk Books, London, 1999
- Risk Management in Banking, Joel Bessis, Wiley, 1998 (2nd edition 2002)
- Beyond Value-at-Risk: The New Science of Risk Management, Kevin Dowd, John Wiley & Sons Incorporated, 1998
Value at Risk, the New Benchmark for Controlling Derivatives Risk, Philippe Jorion, (2nd edition 2001), McGraw-Hill, 1997
Grading
70% Project (to be selected from the titles/list provided by the lecturer), 30% article presentation (articles selected from international, refereed, scientific journals to be handed out by the lecturer). Course hours 09:40-12:40 on Saturdays (subject to change -prior notice) Other Issues Course attendees are required to have a USB disc to store the Excel files and essential readings. Active participation in the courses during lectures is encouregaed. Since the course schedule includes some audio-visual (DVD & VCD) parts, attendees are strongly recommended to have a pre-session work such as reading the excerpts/transcripts. Additional Resources JP Morgan, (1996), RiskmetricsTM Technical Document, fourth edition, NY.
JP Morgan, (1997), Credit MetricsTM Technical Document, NY.
Articles (subjet to frequent updating)
Alexander, C., (2004), “The Present and Future of Financial Risk Management”, ISMA Centre, The University of Reading, February http://www.ismacentre.rdg.ac.uk/pdf/discussion/DP2003-12.pdf Also available at Journal of Fınancıal Econometrıcs, V.3 No.1, p.3-25.
Briault, C., (1999), “The Rationale for a Single National Financial Services Regulator”, Occasional Papers in financial Regulation, Issue:2, May, http://www.fsa.gov.uk/pubs/occpapers/OP02.pdf
Danielsson, J., (2002), “The Emperor has no Clothes: Limits to Risk Modelling”, Journal of Banking and Finance, V.26, p.1273-1296.
Davies, H., (1996), “Culture of Regulation”, Financial Stability Review, Issue 1, p.7-11, http://www.bankofengland.co.uk/publications/fsr/1996/art2(Issue%201).pdf
Drzik, J., (2005), “New Directions in Risk Management” Journal of Fınancıal Econometrıcs, V.3 No.1, p.26-36
Llwellyn, D., (1999), “The Economic Rationale for Financial Regulation”, FSA Occasional Papers in financial Regulation, Issue:1, April, http://www.fsa.gov.uk/pubs/policy/P14.pdf.
Stulz, R.M., (2000), “Why Risk Management is not Rocket Science?”, Mastering Risk Series of Financial Times, Part Ten, 27 June.
Suggested Supportive Reading
Daily Journals Financial Times, Wall Street Journal Europe
Magazines The Banker, Euromoney, Global Risk Regulator, The Economist, Risk Magazine
Scientific & Academic Journals Risk Letters, Journal of Risk, Journal of Credit Risk, Journal of Money and Banking, Journal of Financial Regulation and Compliance, Journal of International Banking Regulation, Risk Management and Insurance Review, Central Bank Review
Web-Sites
www.bis.org
www.riskmetrics.com
www.gloriamundi.org
www.riskcenter.com
www.riskglossary.com
www.risklearning.com