Unit information: Banking Regulation and Financial Stability in 2019/20

Unit name	Banking Regulation and Financial Stability
Unit code	EFIMM0053
Credit points	15
Level of study	M/7
Teaching block(s)	Teaching Block 2 (weeks 13 - 24)
Unit director	Dr. Danisewicz
Open unit status	Not open
Pre-requisites	None
Co-requisites	Specifically for students studying on the MSc in Economics and Finance - if taking this unit, you can not take: EFIMM0006 - Banking OR EFIMM0054 - Principles of Financial Intermediation OR EFIMM0052 - Banking Management and Risk Management
School/department	School of Accounting and Finance - Business School
Faculty	Faculty of Social Sciences and Law

Description including Unit Aims

This module starts with an introduction to banking crises, and discusses how central banks address financial stability considerations. Subsequently, the module discusses the role of monetary policy for bank risk taking, and how financial stability affects the real economy. The following themes are also covered: measurement of systemic risk; contagion in interbank markets; macroprudential regulation; bank bailouts; and stress testing financial systems. Students of this module will obtain a comprehensive overview of the role of regulation and supervision in banking.

Intended Learning Outcomes

On completion of this unit students should be able to:

1. Demonstrate an understanding of key topics in the empirical banking literature focused on financial regulation and stability;
2. Demonstrate knowledge of the importance of financial stability considerations both from a micro-, as well as from a macroeconomic perspective;
3. Comprehend and analyze sources of instabilities in the financial system and evaluate their effect on other agents in the financial system.
4. Explain the importance of financial stability considerations in central banks;
5. Gauge the extent to which regulation and supervision affect commercial banks’ conduct, and, ultimately, the real economy;
6. Analyse and interpret central bank statements concerning financial stability;
7. Appropriately use microeconometric techniques to answer research questions in banking.

Teaching Information

Teaching includes a combination of lectures and smaller group workshops. In total there are 15 hours of lectures which are intended to be very interactive with students being expected to actively participate in the discussion of topics covered in the course. During five one hour workshops students will be presented with an opportunity to discuss real life examples related to topics discussed during lectures. Students will also complete their multiple choice tests as well as work in groups to complete case studies.

Assessment Information

Formative assessment

Students will be provided with formative assessment during workshops. For example, students will be required to work in groups of 4 to complete a case study which they will present to their colleagues and will receive verbal feedback from tutors. Students will be given an opportunity to practice the online multiple choice tests.

Summative assessment

(1) '30 % Group assignment consisting of an empirical research project (max 2000 words).

Students will be required to form teams of 4-5 students at the beginning of term and each group is required to complete a task that is both empirical and analytical. The assignment theme will be based on one of the themes covered in the module (e.g., monetary policy and bank risk taking). This assignment places great emphasis on the conceptual understanding between regulation and bank conduct. Students will be given some data with the aim to interpret the data in light of the literature discussed in class. The assignment task will be put on Blackboard.

For the group assignment students will be able to select their group members. Appropriate and detailed protocols will be put in place for selecting groups, efficient group work, time management in a group, allocation of responsibilities, and ensuring equality of contribution and about support for group work. There will also be rules for disputes among group work. All students in a given group receive the same mark.

This assessment will assess ILO1, ILO2, ILO3, ILO7, ILO6

Overall word count: 2,000 words, excluding Stata programme

(2) '60 % Individual assignment (max 1,500 words).

This assignment consists of a task for the student to demonstrate the ability to furnish a report on bank bailouts, weighing the pros and cons of such government intervention in the financial system.

The assessment will assess ILOs 1 - 5

Overall word count: 1,500 words

(3) '10 % Multiple choice tests (3 tests).

This assessment component requires students to complete 3 multiple choice tests. Each test comprises of 10 questions related to the material covered in class. The multiple choice tests will be computer based, and questions will be randomized for each student.

Students will be assessed on their ability to demonstrate:

The assessment will assess ILOs 1 - 5

Reading and References

There is no core text book available. This module relies on research papers and reports issued by central banks and international organisations. The papers in the journals from the reading list are essential reading material. The academic literature will be drawn from the following journals: American Economic Review; Journal of Finance; Journal of Financial Economics; Review of Financial Studies; Journal of Financial Intermediation; Journal of Money, Credit, and Banking. Students are expected to have obtained and read a copy of each paper in the essential reading list prior to each lecture or workshop.