Economics of Banking (F)

Course content

The course covers two aspects of the topic, microeconomics of banking and risk management. In the microeconomics part, teaching starts with discussing key competences of banks, proceeds to fundamental aspects of banking such as the loan contract and credit rationing, discusses liquidity problems and bank runs, and ends up with a treatment of bank regulation involving the roles of central banks, deposit insurance and financial supervision authorities. In the risk management part, the course covers the basics of risk management in banks, measurement of risk, and then discusses the different types of risk occurring in banking, namely liquidity risk, interest rate risk, market risk, credit risk, and operational risk. For each of the risk types, the course covers the measurement of risk as well as methods for reducing risk.

Course Outline:

Introduction: Key competences of banks

Types of financial intermediation; basics of risk management

The loan contract; interest rate risk

Rationing in the credit market; market risk

Securitization and shadow banking

Credit risk

Payments and its impact on banking

Competition and risk taking

Irregularities in banking

Liquidity crises and bank runs; operational risk

Deposit insurance

Lenders of last resort

Reorganizing and closing banks

The Basel regulations

Education

MSc programme in Economics – elective course
The course is part of the Financial line at the MSc programme in Economics,   symbolized by ‘F’.

Learning outcome

After completing the course, the student should be able to:

Knowledge:

  • Identify and assess the roles of banks in the financial sector, related to the basic problems of asymmetric information in its different forms,

  • know the basic principles of risk management and of risk measures, as well as the basic organisation of risk management in a bank,

  • Understand the causes of bank runs and bank panics, knowledge of different institutional setups designed for coping with bank runs,

Skill:

  • Select relevant theories and analyze problems related to financial intermediation,

  • Evaluate alternative methods for managing risk in banks,

  • Give suggestions for suitable regulation in the financial sector,

Competences:

  • Assess properties of credit markets, designing improvements of the contract structure,

  • Give advice for the regulation of financial intermediation and for the prevention of financial crises.

 

We use the textbook

H.Keiding, Economics of Banking, Palgrave-Macmillan 2015.

Schedule:
2 hours lectures 1 to 2 times a week from week 6 to 20 (except holidays).


Timetable and venue:
The schedule for the semester spring 2018 will be available no later than 7th of November 2017

ECTS
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
at the computers of University of Copenhagen. The exam assignment is given in English and must be answered in English.
Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
if chosen by the Head of Studies.
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 161
  • Exam
  • 3
  • English
  • 206