AC959 – Bank Strategy and Risk Dr. Paul Hamalainen [email_address] Office Hours:  Tuesday 2-4 Wednesday 10-11
Aims <ul><li>Identify the key environmental developments in banking in recent times </li></ul><ul><li>identify and evaluat...
Key concepts discussed <ul><li>Bank strategies and strategic developments </li></ul><ul><li>Shareholder value / stakeholde...
Teaching Delivery and Assessment <ul><li>10 two-hour lectures </li></ul><ul><li>Lecture schedule (see handout) </li></ul><...
Lecture 1: Banks and the Economy <ul><li>Aims of the lecture </li></ul><ul><ul><li>Explain the role of the Financial Syste...
Role of the Financial System <ul><li>Intermediary between surplus and deficit units - allocation of funds to their most ef...
Types of Financial Intermediaries <ul><li>Bank financial intermediaries - Retail and investment banks. </li></ul><ul><li>N...
Role of Financial Intermediaries <ul><li>assist in the transfer of funds from surplus agents to deficit agents.   </li></u...
Benefits of financial intermediaries <ul><li>Surplus Units </li></ul><ul><li>Deficit Units </li></ul><ul><li>Society as a ...
Role of Financial Markets <ul><li>Liquidity </li></ul><ul><li>Price discovery process </li></ul><ul><li>Reduces search and...
Types of banking activities <ul><li>Commercial banking </li></ul><ul><ul><li>Relationship banking </li></ul></ul><ul><li>I...
Key developments in banking <ul><li>Traditional versus Modern Banking   </li></ul><ul><li>Financial deregulation </li></ul...
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Lecture 1 slides.ppt

  1. 1. AC959 – Bank Strategy and Risk Dr. Paul Hamalainen [email_address] Office Hours: Tuesday 2-4 Wednesday 10-11
  2. 2. Aims <ul><li>Identify the key environmental developments in banking in recent times </li></ul><ul><li>identify and evaluate the main banking strategies to create shareholder value </li></ul><ul><li>understand the key risks in banking </li></ul><ul><li>Critically evaluate the most important tools to measure and manage bank risks </li></ul>
  3. 3. Key concepts discussed <ul><li>Bank strategies and strategic developments </li></ul><ul><li>Shareholder value / stakeholder value </li></ul><ul><li>Bank Risks and risk management </li></ul><ul><ul><li>Credit Risk </li></ul></ul><ul><ul><li>Liquidity Risk </li></ul></ul><ul><ul><li>Interest Rate Risk </li></ul></ul><ul><ul><li>Market Risk </li></ul></ul>
  4. 4. Teaching Delivery and Assessment <ul><li>10 two-hour lectures </li></ul><ul><li>Lecture schedule (see handout) </li></ul><ul><li>50% exam (two-hour) </li></ul><ul><li>50% individual coursework (essay) – due Wednesday 14 th January 2009 (wk. 16) </li></ul><ul><li>Additional resources </li></ul><ul><ul><li>reading list / handouts </li></ul></ul><ul><ul><li>Moodle http:// moodle.essex.ac.uk / </li></ul></ul>
  5. 5. Lecture 1: Banks and the Economy <ul><li>Aims of the lecture </li></ul><ul><ul><li>Explain the role of the Financial System </li></ul></ul><ul><ul><li>why do we need financial markets? </li></ul></ul><ul><ul><li>why do we need financial intermediaries? </li></ul></ul><ul><ul><li>what are types and functions of financial intermediaries? </li></ul></ul><ul><ul><li>Identify key developments in banking </li></ul></ul>
  6. 6. Role of the Financial System <ul><li>Intermediary between surplus and deficit units - allocation of funds to their most efficient use amongst competing claims - outer flow . </li></ul><ul><li>Payment mechanism - middle flow . </li></ul>
  7. 7. Types of Financial Intermediaries <ul><li>Bank financial intermediaries - Retail and investment banks. </li></ul><ul><li>Non-bank financial intermediaries (NBFI’s) </li></ul><ul><ul><li>Life insurance and assurance </li></ul></ul><ul><ul><li>Pension funds </li></ul></ul><ul><ul><li>Investment and unit trusts </li></ul></ul>
  8. 8. Role of Financial Intermediaries <ul><li>assist in the transfer of funds from surplus agents to deficit agents. </li></ul><ul><li>Asset transformation </li></ul><ul><ul><li>Risk Transformation </li></ul></ul><ul><ul><li>Maturity Transformation </li></ul></ul><ul><ul><li>Size transformation </li></ul></ul><ul><li>Liquidity Provision </li></ul><ul><li>Reduction in information costs </li></ul>
  9. 9. Benefits of financial intermediaries <ul><li>Surplus Units </li></ul><ul><li>Deficit Units </li></ul><ul><li>Society as a whole </li></ul><ul><ul><li>more efficient utilization of funds within an economy </li></ul></ul><ul><ul><li>higher level of borrowing and lending can be undertaken </li></ul></ul><ul><ul><li>improvement in the availability of funds to higher-risk projects </li></ul></ul>
  10. 10. Role of Financial Markets <ul><li>Liquidity </li></ul><ul><li>Price discovery process </li></ul><ul><li>Reduces search and information costs </li></ul><ul><li>Transfer of risk </li></ul><ul><li>Discipline function </li></ul>
  11. 11. Types of banking activities <ul><li>Commercial banking </li></ul><ul><ul><li>Relationship banking </li></ul></ul><ul><li>Investment Banking </li></ul><ul><ul><li>Advising on Mergers & Acquisitions </li></ul></ul><ul><ul><li>Underwriting shares </li></ul></ul><ul><ul><li>Aircraft leasing </li></ul></ul><ul><ul><li>Trading securities </li></ul></ul><ul><ul><li>Asset Management (managing pension funds) </li></ul></ul><ul><li>Trading </li></ul><ul><li>Private Banking </li></ul>
  12. 12. Key developments in banking <ul><li>Traditional versus Modern Banking </li></ul><ul><li>Financial deregulation </li></ul><ul><li>International Banking/Global Banking </li></ul><ul><li>Private Banking </li></ul><ul><li>Financial Innovation </li></ul><ul><li>Technology and E-banking </li></ul>
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