Teaching hours: 23
ECTS credits: 3
- The recent financial crisis: the changes for the world’s banking industry: origin of the crisis, financial instability, systemic risks, weakness of global finance, bankruptcy, bank failures and major changes (“Big Five US” Merrill Lynch, Goldman Sachs, Morgan Stanley, Bear Stearns, Lehman Brothers), new banking business model “big is beautiful”, “too big to fail”, strengths and weaknesses of bank regulation in United States, European Union, China, Africa…
- Deregulation and risks in the 80s: the financial Big Bang, new banking firm is born “universal banking” = “generate to distribute”. Investment banking, high interest rate volatility, traditional assets and liabilities activity (loans, deposits vs bonds, securities, financial markets): free fall? New services and business: off balance sheet>balance sheet.
- Why do bank exists? Microeconomic role and functions of the banking firm. Information management: moral hazard, adverse selection and informational asymmetry. Risk management and monitoring. Economies of scale and reduction of transactional costs. Microeconomic approach of banking firm as risk manager. Modelling the banking firm. Asset liabilities management model. Optimal liquidity risk management (Klein 1971). Excess of liquidity: opportunity cost. Deficit of liquidity: operational and financial costs (Baltensperger, 1980).
- Categories of risk: credit, market, operational, reputational etc. The general approach of portfolio credit risk management. What is the expected return and variance of the portfolio? Statistical measures to assess financial risks.
- Can diversification eliminate risk?
Macro-prudential approach and systemic credit risk: the role of regulation in a globalised banking system. Basle approach: Solvability, liquidity risks ratios. Pro-cyclical and contra-cyclical approaches. Basle 1, 2 and 3. VaR: measures of the potential loss. Capital adequacy of financial institutions. Banking regulations (Basel 2): requirement implementation of risk measures such as VaR.
- Sustainable finance and sustainable bank. A new paradigm for finance. The strong link between “sustainability” and “doing well by doing good”. Good governance = good behaviour.
- Socially Responsible Investment (SRI) and Corporate Social Responsibility (CSR) and the Stakeholder approach (Edward Freeman, 1984).
- Sustainable performance - new evaluation of banking efficiency: an application to French banks
- Team contribution: Workgroup and student work presentation based on the homework done prior to the course.
- Final synthesis and assessment: What are our main findings? The main message? Contribution to new knowledge? New concepts identified and discussed? Suggestions for the future.
REFERENCES - Academic and scientific papers
- Allen F. et A.M. Santomero, 2001, What do financial intermediaries do?, Journal of Banking and Finance, 25, 271-294.
- Battacharya S., Thakor A.V., 1993, "Contemporary Banking Theory", Journal of Financial Intermediation, 3.
- La Porta, Lopez-de-Silanes, Shleifer et Vishny (1997), "Legal Determinants of External
Finance", Journal of Finance, 52(3).
Lewis M. K., 1992, "Modern Banking in Theory and Practice", Revue économique, n°2, Mars.
- Saidane D. (2010), "How to Identify the Best Target in the M&A Banking Operations? Case of Cross-Border Strategies in Europe by Line of Activity", Review of Quantitative Finance and Accounting.
- Saidane D. (2010), "Banking transparency: a good idea but difficult to implement", Bankers Markets & Investors.
- Saidane D; and Grandin P. 2010), "What are the main causes of Bank Merger and Acquisition?" Bankers Markets & Investors, n°104, January-February 2010