| Management of Financial Institutions |
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FIN B480
Management of Financial Institutions
| Introduction |  |
This course is about managing financial institutions such as banks, other depository institutions, insurance companies and pension funds. My name is Robert Haney Scott and, as the developer of this course, I plan to do my best to guide you through an excellent textbook that is widely used not only in the US but also in Hong Kong universities. The book is designed to provide you with background information on how banking institutions can be managed successfully from a financial management point of view.
We know that banks and other financial intermediaries are very important institutions for developing economies. Unfortunately, most under-developed economies have even less developed financial institutions, and these are needed to support an exchange economy if it is to provide increases in the standard of living.
It is also important for you to know about the problems that managers of financial institutions face and how they might tackle those problems. It is important, that is, if you plan a career in the finance industry.
This Course Guide is supposed to give you an idea of the course's content. For example, below you will find outlines of the overall course aims and objectives, as well as a list of the titles of the study units and breakdown of the workload. It also includes a description of the study materials needed for this course, the study support system provided by the OUHK and how the course is assessed.
Although this is a distance learning course, it is really quite similar to a typical lecture-and-discussion course such as those offered on most university campuses. Like other OUHK courses you may have taken, in this course you will be asked to try to think of me in the role of a professor who is carrying on a discussion with you. This will help to reinforce the feeling that someone is interested in you and your learning of these subjects. So we request that you try to play along with our attempt to personalize the relation between your course and your studies. All of us here at OUHK hope that this relation will be helpful.
There are ten separate study units in this course. Each will include around four self-tests and a variety of guided activities for you to engage in as you work your way through the required reading materials.
This course requires some background in accounting and economics, and a small amount of basic mathematics. You are well equipped to proceed with studying this course if you have previously taken ECON A230 Introduction to Economics, or its equivalent. Also, if you are taking this course it is assumed that you have already taken FIN B380 Banking and Financial Systems in Hong Kong, which describes financial institutions and systems and how they work.
Specifically, however, this course is an applied course in financial management. Basic banking principles are applied to the management of banks, other deposit-taking firms and financial intermediary firms of all kinds.
When I taught this course back in the US, my students said, 'Hooray!' because after learning all about duration, the term structure, and so on, they finally found a course in which the practical applications of these theoretical topics were acknowledged.
Please remember that university courses are not about how to do things. Instead they are about understanding things. This is a university course. When you finish it, you will understand many of the strategic problems bank managers face and how these problems might be managed using sophisticated tools of financial management. Good luck!
| Course aims | |
FIN B480 Management of Financial Institutions aims to:
Help you become aware of the many aspects of strategic bank asset and liability management.
Provide you with the background needed to manage and supervise the risk-reduction activities of banks.
Introduce you to new concepts now applied to the strategic management of banking institutions.
Challenge you to understand how and why banking institutions are rapidly changing their activities and increasing their global presence.
Enable you to appreciate the interface between government and banking, and the importance of this to bank managers in their development of strategic management policies.
Give you confidence in bank managers' ability to manage a bank.
| Course learning outcomes | |
Upon completion of FIN B480 Management of Financial Institutions, you should be able to:
Discuss the types of asset and liability that bank managers must deal with.
Analyse and employ policies used in managing a bank's loan portfolio and deposits.
Analyse the problem of interest rate risk faced by bank managers.
Evaluate the role played by fee-based services in bank profitability.
Identify the important factors affecting bank performance.
Distinguish activities of investment companies and mutual trusts from those of banks.
Characterize the management of securities firms and other non-bank financial intermediaries.
| Course materials | |
The materials provided for the course include:
- Study units
- Supplementary reading materials
- Assignments
In addition, there is one set textbook that you need to buy.
Study units
You have probably already taken several OUHK courses and this will be just like the usual ten study unit courses that you have worked through before. Each unit will require three to four weeks of work, depending on the speed with which you go through them. It is important that you work slowly and deliberately through the units and follow the instructions. They are designed to ensure that when you take exams you will be prepared to answer questions effectively.
Within each unit there will be the usual self-tests and you should take adequate time to do these. There will also be exercises and activities. For these you will need pads of paper, and you will occasionally be asked to provide necessary information yourself by asking friends or bankers for information. Be sure you have a big pad of paper to write out the recommended items as you progress through a self-test or activity.
FIN B480 Management of Financial Institutions is a course prepared around a prescribed textbook. The study units provide guidance to your reading of textbook. They include points of clarification, provide examples, suggest questions that might appear on assignments and examinations, and generally assist you in your studies. This process of studying a textbook under guidance will help you understand the concepts and principles presented in the text.
Set textbook
There is one compulsory textbook for FIN B480 Management of Financial Institutions:
MacDonald, S S and Koch, T W (2006) Management of Banking, 6th edn, South-Western Cengage Learning.
There is also a reference book which we will use in this course. The parts you need will be reproduced in the study units as readings. A copy is also available in the OUHK Library:
Gardner, M J, Mills, D L and Cooperman, E S (2005) Managing Financial Institutions, 5th edn, Thomson/South-Western.
Readings
You may be instructed in the study units to read articles or other supplementary materials. These will be available online or provided as hard copies at the backs of the study units. For online readings, instead of typing in the URL, you can click the link in the online study unit provided in the OLE.
E-Library E-Reserve readings
You may be instructed to read articles in the E-Library E-Reserve. To read these items, go to the OUHK E-Library and click E-Reserve. Log in, click Accept/Agree on the Copyright Restrictions page, fill in the Course Code box, and click Search.
Assignments
You will be given four assignments to complete during the course of your study of FIN B480. These can be stored in the Assignment File of your course material folder. There is one assignment to complete after you have worked through each set of two study units.
All of the assignments for this course are tutor-marked assignments (TMAs). That is, you will be asked to prepare assignments in either short-essay form or somewhat longer essay form, which will be marked by your tutor.
The Assignment File provides you with information on how to present your answers to assignment questions.
Marks gained on the four assignments will be used to make up half of your course grade. The other half will be based on results from your final examination.
Be sure to follow carefully the instructions in your Student Handbook when submitting assignments.
TMA extension policy
The assignment policy of the University as stated in the Student Handbook should be observed. Applications for extension of up to seven days should be submitted to the tutor. For extensions of over seven days, students should note the following:
Assignment extensions may be granted in extenuating circumstances, which should be interpreted as circumstances that are unexpected. Work commitments and travelling are not regarded as extenuating circumstances unless they are unexpected.
Supporting documents must be submitted along with the application for extension of over seven days to justify the claim. Applications without supporting documents will not be considered.
Applications for extension should be submitted either before or on the due date.
- The decision to grant or refuse an extension is made by:
- the tutor for extensions of up to 7 days
- the Course Coordinator for extensions of up to 21 days;
- the Dean for extensions of over 21 days.
If the assignment is posted to the tutor, it is the responsibility of the student to check that the assignment has successfully arrived (see Assignment File). Extension applications without supporting documents on the ground of postal loss will not be accepted. The University cannot accept any responsibility for assignments that are not received by your tutor due to problems with the post. As a precaution, you are advised to keep a copy of each assignment you submit and obtain a certificate of posting from the post office when you post your assignment.
Online Learning Environment
This course is supported by the Online Learning Environment (OLE). You can find course materials and the latest course information from the OLE. Through the OLE, you can also communicate with your tutors, the Course Coordinator and other students. For details about the OLE and how to access it, please refer to the Online Learning Environment User Guide.
| The OUHK support system | |
The OUHK support system is designed to make the task of learning at a distance more efficient, helpful and rewarding. If used properly, the support system will increase your chances of completing the course successfully.
Tutors
You will be informed of the name, address and telephone number of your tutor once you have been allocated a tutorial group. Your tutor has been specially trained to help you to understand and learn from the course. They will be available to comment on your assignments, counsel you over the telephone on academic matters and participate in tutorials.
Your tutor is keen to help you complete the course successfully and will monitor your progress closely. They will certainly keep in regular contact with you. However, they may not be able to contact you as frequently as you would like or need. There are times when you will need to make the first move. Consequently, if you experience problems in your study, do not hesitate to initiate the call. Students who maintain regular contact with their tutors are often more successful in their studies.
Your tutor has set aside certain hours every week to attend to your telephone queries. These are the preferred hours of contact. They will inform you of these hours during the first tutorial. If you cannot attend the first tutorial, contact your tutor. Make a note of the hours, perhaps somewhere in this Course Guide. Try your best to respect your tutor's wishes by contacting them only during the preferred times. Make a note of the matters you wish to discuss prior to making a call.
In all academic matters, your tutor is your first point of contact with the Open University of Hong Kong. However, if your tutor cannot resolve a problem, you should contact your Course Coordinator.
Course Coordinator
The Course Coordinator is responsible for preparing your course material and administering the course. The Course Coordinator is a full-time staff member of the Open University of Hong Kong and can be reached there during office hours. If you are unable to reach the Course Coordinator, leave a message listing several suitable times for your call to be returned, as well as your name and telephone number. It would also be helpful if you briefly stated the nature of your enquiry in your message.
In view of the number of students enrolled in the course, there may be times that you simply cannot reach the Course Coordinator by phone. An alternative is to write a letter explaining your problem. It is important that you inform your Course Coordinator of problems as they occur. In any case, do not hesitate to let your tutor or Course Coordinator know how you are coping with the course. Your needs are our main concern.
Tutorials
This course includes two two-hour and eight three-hour tutorials. Tutorial sessions are conducted in English by your tutor, and all sessions are held during evenings or weekends. In distance learning, the primary means of teaching is through the written wordthat is, your study materials and set textbook. Consequently, attendance at tutorials is voluntary. However, you are strongly encouraged to attend, as these sessions are invaluable opportunities for you to exchange views with other students who are striving towards the same goal.
You will be notified of the date, time, location and any other relevant details about each session in due course. Activities scheduled for tutorials usually involve reviewing topics that you have studied and applying what you have learnt to case study discussions or experiential exercises. The usefulness of the sessions will depend largely on your involvement. By coming prepared, you will be able to participate actively in these sessions.
Tutors are required to start tutorial sessions on time. If a tutor fails to turn up 30 minutes after the scheduled starting time, students may assume that the session is cancelled and they should report the case to the Course Coordinator so that a make-up session can be arranged.
Self-help groups
We would be very happy to see each of you complete the course successfully, and staff members are pleased to help you whenever possible. Unfortunately, the amount of contact your tutor and Course Coordinator can provide is limited. Therefore, you may find it worthwhile to form a self-help group. By establishing a network of contacts with your fellow students, you can meet and share your views, problems and frustrations. You can support each other and offer encouragement.
During the first tutorial, your tutor will help you to form such a group. Try to be there on that day. If you are unable to attend, ask your tutor to supply you with the phone numbers of a few of your course mates.
It is helpful to discuss assignment questions with other students, but you must write your own answers. If identical or very similar answers are submitted by different students, this will be considered a form of cheating (plagiarism). Cheating is an offence and is liable to incur serious penalties.
The above-mentioned sources of support are the most obvious available to help make life easier for you as a distance learner. If there are other useful means that you come upon during the course of your study, write and let us know. This will benefit other students in the future.
| Assessment | |
There are two parts to the assessment for the course. There is a three-hour final examination. There is also continuous assessment based on the four tutor-marked assignments (TMAs) that you are given to do at home. To pass this course you must pass both parts of the assessment process. That is, you must earn at least 40% of the marks provided for the final exam, and you must receive at least 40% on average for the four assignments that must be turned in for grading as tutor-marked assignments (TMAs).
Continuous assessment
The continuous assessment portion of the course grade will be 50%. Since there are four assignments to be submitted, this means that each of the assignments comprises 12.5% of your overall course grade. You are required to submit all five of the assignments. You will not be given permission to choose to answer some questions from among a group of questions. Instead, you will be asked to attempt all of the questions asked on the assignment sheet. All four assignments in this course are essay-style tutor-marked assignments; there will not be any multiple choice questions that provide for computer-marked assignments (CMAs) in this course.
Final examination
A final examination worth 50% of the overall mark for the course will be given at the end of your studies. You will be notified about the date and time of the final examination, and the place where it will be held, about two months prior to the end of the course period.
Special arrangements for taking the final examination when you are residing outside Hong Kong may be made if you apply to the Registrar at least eight weeks before the examination is to take place.
Marking scale
Records will be kept of your performance on tutor-marked assignments (TMAs) and you will be informed of your marks for each assignment. The TMA marking scheme is based on a 100 point numerical scale.
The final exam will be graded in a similar fashion, and the two parts of the assessment process will be combined. The following table indicates that combination.
Table 1 Course marking scheme: assessment breakdown.
Type Marks Assignments
Assignments 1-4
Final examination
4 x 12.5% = 50%
50%Total 100%
| Use of case studies | |
Case studies are a useful and increasingly popular form of learning and assessment in the OUHK's Lee Shau Kee School of Business and Administration. In this section we will look at why case studies are used and then suggest some learning strategies that you can use to approach case studies. We will also briefly discuss some problems that you may encounter as you learn from case studies.
What is a case study approach to learning?
One main purpose of a case study is to explore an issue or a number of issues in relation to an organization. The intention is to get you to carefully diagnose an organization; to focus on key problems, and to suggest how these might be resolved. Often the case is a real-life account of an organization which you are required to analyse in order to focus on a problem. Usually, the information that is provided is incomplete and you are often expected to observe developments in the organization over a period of time. The case study approach is an excellent opportunity to actively apply material that you have read and conceptual knowledge to the reality of an organization.
At the OUHK, case studies may be used as part of TMAs, exams, study units, or day-school exercises. You normally are given some information about a company (this could be both text and graphical information, such as figures and tables). You are then asked to think about some problems related to the company and to use concepts and apply theories that you have learned in your course to propose possible solutions for the company.
Let's have a look at two kinds of case study questions that you might be asked to work through in your courses. The first example is quite structured, while the second is much more open-ended.
Two examples of case study questions
Read the case study entitled 'ABC Consultants' and consider the following issues:
Using your understanding of the resource-based model, what measures could be taken to improve ABC's returns?
Drawing on your broad understanding of the consultancy industry, assess ABC's relative competitiveness and its profit potential.
To what extent do internal factors account for ABC's financial weaknesses?
Based on your assessment of ABC's financial weaknesses, formulate a new strategic intent and develop a mission statement for ABC.
- Read the case study entitled 'XYZ Industries'.
Identify the key problems that are currently faced by XYZ's management.
Propose viable solutions to these problems.
Why case studies?
As you can see from the above examples, a case study approach to learning requires a great deal of thinking and often will not easily yield a quick 'wrong' or 'right' answer. However, case studies are also good preparation for dealing with real-life business problems. Cases may be short and relatively simple, or longer and complex. The purpose is the same for both types: to give you an opportunity to develop your skills in analysing the strengths and weaknesses of the organization under examination, to consider the processes at work within the organization, and to make decisions about future actions.
Case studies are not meant to replace textbooks, but rather to ask you to draw connections between theories and practice and to apply abstract ideas, concepts, and principles to specific concrete situations. Consequently, case analysis develops a number of skills that are crucial in business. In particular, they help you to:
analyse complex, unstructured, sometimes ambiguous situations;
identify critical issues and problems;
question your own and others' assumptions;
improve your problem-solving skills;
develop your ability to find alternatives and make informed decisions;
make decisions with incomplete information and think strategically;
self-educate yourself and draw on a broad range of resources and knowledge; and
- present and justify recommendations in writing.
You may find that there are many possible 'right' answers to the questions in a case study. This illustrates that there is often no single best way to responsibly manage and solve real-life business problems.
Some guidelines for analysing case studies
The following strategies should help you to successfully analyse case studies:
1 Read the case and become familiar with the facts
First, skim read the case to obtain a general understanding of the main point(s). Highlight or underline the pertinent points as you read.
Read the case again, and this time note down critical facts (such as names, time sequences, and where events occurred). Try to understand how events have influenced decisions. Identify the important individuals or stakeholders, and try to assess the importance of supporting information in the case. How reliable is this supporting information? Are there any gaps in the information that is given?
Make a note of any questions that you have as you read the case.
2 Assess the context of the case
Try to understand the environment of the organization and the wider context of the case.
Ask yourself questions about:
The state of the organization: What is the state of this organization: good, bad or in-between? Usually this involves thinking about interpersonal relationships, and assessing production or financial problems.
Key players and systems: How do systems and people operate in this organization? Why do they operate like this? Are the systems undergoing change? How successful are the changes? Is there someone who could sabotage any future strategy? Is there someone who can ensure the success of a future strategy?
Significant trends: How does this industry operate? What are the main or unique characteristics of the industry? What were they five or ten years ago, and what are they likely to be in the future? What impact are trends likely to have on the organization under investigation? How does this organization's performance compare with that of competitors?
Constraints: Clearly identify all constraints in the case. A constraint may be viewed as anything (usually beyond the control of the organization) that may prevent an otherwise feasible course of action from becoming a success. What is outside the control of individuals in the case study? For example, it is unlikely that any company or individual in Hong Kong could prevent a foreign government from imposing tariff barriers on imports.
A SWOT analysis is a good way to get a better understanding of the organization and the context or environment in which it is operating. A SWOT analysis considers the Strengths and Weaknesses of the organization, and the Opportunities and Threats which the organization faces in the external environment.
3 Recognize the case's symptoms
Read the case again and as you read, try listing all the symptoms of the case. The symptoms of a case are not the problems, but they may help you to identify the problems. Symptoms are all the things that are undesirable or that are not as expected. For example, falling sales could be a symptom of several problems such as poor market segmentation, poor product quality, or problems in a supply chain. At this stage of your analysis, you should just try to observe all the symptoms, and avoid prematurely identifying problems or suggesting solutions. Like a doctor who consults a patient, you first need to observe and note all the symptoms before you can give a definite diagnosis of the problem. Think about how the symptoms may be interrelated. Relationship diagrams, like the one below, may help you to see the relationships between symptoms.
4 Diagnose the case's problems
After you have a good sense of the symptoms, you're ready to determine key issues that need to be analysed more closely. You are now diagnosing the situation, like a doctor diagnosing a patient's symptoms. Ask yourself 'what seems to be the trouble in this organization?' and make a list of what you now perceive to be the key problem(s). You will probably need to go back to the details of the case and as you do this, you may add to or refine your list of potential problems.
If there are several problems, you need to order and prioritize them. You might want to number problems according to how you perceive their importance, or make a matrix, like the one below, which shows relationships between various criteria and each problem.
Criteria Problem #1 Problem #2 Problem #3 Importance: what will happen if the problem is not addressed? Urgency: how quickly must this problem be solved? Centrality: To what extent does this problem cause others? Solvability: Can this problem actually be solved? Also try to establish if there are relationships or themes in common among the various problems. Perhaps different problems in your list are actually variations of a broader central problem.
Ask yourself what assumptions you have made about the case. Are these assumptions reasonable, and are they supported by the facts? Would other people objectively suggest the same problems, based on the facts that you have? Are you suggesting problems that are not supported by the facts of the case?
After you have considered and put into order the possible problems and questioned your assumptions relating to these problems, you should write a statement of the problems as you perceive them. Avoid suggesting solutions at this stage.
Once you have a problem statement, you need to find evidence in the case to support your problem diagnosis. Also, try to identify ideas, concepts and theories from your textbook and course units which help to explain what is happening in the case.
5 Formulate criteria for a 'good' solution and identify possible constraints to solutions
Before you propose a solution, you need to consider the characteristics of a 'good' solution. Obviously, your solution should bring benefits such as improved productivity, reduced costs or greater profits. However, it also needs to be viable and to accommodate the constraints that you have already identified, i.e. Is the solution legal? Is there a budget for this solution? Does it conflict with the organization's culture?
Try to brainstorm alternative solutions. Aim to generate a broad and creative range of options and then try to rate each according to various criteria.
The following matrix demonstrates how this can be done.
Also refer to ideas, concepts and theories from your course materials as you consider and assess each possible solution.
It's often wise to propose a solution that allows for plausible alternatives if it should fail. Managers use the term satisfice when they are considering acceptable alternative solutions, that is, the solution is able to satisfy the situation while also making some realistic sacrifices to existing constraints. Therefore, it is a satisficing rather than a maximizing solution.
Finally, don't forget to consider the possibility of taking no action. What will actually happen if no action is taken? Are any (or all) of the solutions less viable than taking no action at all?
6 Recommend a viable solution
After you have assessed the merits and pitfalls of each alternative solution, select the best solution for the situation.
Remember that the solution needs to be viable. Can the recommended solution be introduced? Are there the resources and the willingness to implement it? Be realistic about what may work. Explain why it is the best solution within the constraints of the existing context and explain how it can be applied to the organization. Suggest a time-frame for the solution's implementation.
Outline possible strategies for implementing your solution, either partially or completely. As many feasible courses of action as possible should be considered before you choose the one that seems the most likely to succeed. The more ideas you have, the greater your chance will be of finding a solution that will work well. The complexity of most organizational problems means that it is highly unlikely that one idea alone will correct the situation. Usually a combination of actions is required, and these need to be funded differently, timed carefully and staffed as necessary.
7 Present your solution as a written recommendation
Review your final solutions and then prepare a set of written recommendations. These should clearly outline your proposed solution in relation to the problems that you have identified. Your recommendations should also include details of why these solutions are the most appropriate given the circumstances and constraints of the case. Finally, you need to clearly state how and when your proposals will be implemented.
Your tutor and your course Assignment File can provide some guidelines on how to present your recommendations.
Some mistakes to avoid as you analyse cases
When you first tackle case studies, you should be careful to guard against the following mistakes:
One of the most common mistakes made in case analysis is repeating or simply summarizing the facts of the case. Your tutor is already very familiar with the case details, so you do not have to restate them. You are required to use and analyse the facts, not repeat them. Your analysis should contain only enough case material to support your arguments. Therefore, be analytical!
You may often be tempted to just deal with symptoms and ignore the causes of the problem. It is very important to analyse the background of the case (and the climate in which the events of the case unfold).
Avoid discussing problems in isolation and do not overlook their interrelatedness. If you try to think in terms of 'systems' rather than in terms of individual problems, you are more likely to avoid this pitfall.
Students often fail to state the assumptions underlying their analysis. If any important assumptions have been made, have you questioned them and are they reasonable and appropriate? Avoid selectively using and interpreting case material in order to justify a preconceived solution.
Practical limitations and constraints may sometimes be overlooked. For example, a recommendation that a whole team be fired is probably unrealistic.
A very common mistake is poor integration of the facts in the case with the concepts, principles, and theories in the textbook. Such integration is vital. Ask yourself if relevant theories from your course have been fully and constructively applied.
Finally, recommendations are too often not spelled out in detail or are unrealistic. A timetable for implementing them is also often not given.
Analysing cases poses many challenges, and this is one reason the case study method is so rewarding. It is a very active form of learning. It offers you a risk-free opportunity to gain managerial and organizational experience and should greatly increase your confidence to make informed decisions in the real world.
Good luck and we hope you enjoy working through the cases that you encounter!
| Course overview | |
This table brings together the units, the time taken to complete them, and the assignments that follow them.
Unit Title Weeks Assessment activity of work (end of unit) 1 Managing financial institutions in a changing environment 3 2 Organizational structure of financial institutions 4 Assignment 1 3 Deposit management in financial institutions 3 4 Managing a bank's loan portfolio 4 5 Managing liabilities and capital 3 Assignment 2 6 Managing assets, liabilities and capital in Hong Kong 4 7 Managing interest rate risk 3 8 Managing long-term investment and fee-based services 4 Assignment 3 9 Valuing bank and finance company performance 3 10 Managing pension funds, securities firms and diversified service funds 4 Assignment 4 Review 3 38
| How to get the most from this course | |
Here is some hints that will make this course easy to study:
Read newspapers and keep up with current events in banking and finance.
Discuss issues as they arise with your friends and relatives.
Ask them for their opinions and be a good listener.
Don't dismiss any opinion you hearit may turn out to be a good one.
Glance through magazines that carry banking and financial news.
Work on your study units just a little bit every day to keep your interest up.
Find a quiet place where you will be uninterrupted for concentrated study.
Don't let yourself get too far behind because if you do, you will try to rush and then you will not enjoy what you are doing.
Find some colleagues who are taking this course and discuss it with them.
Enjoy yourself!
If you set out to enjoy your studies from beginning to end, you will get a lot out of this course.
| Summary | |
You have already studied a great deal about banking. There will be many occasions as you work through these course materials that you will say, 'Ah, I know that!' You should be pleased to find that you are familiar with many of the ideas and concepts used in this course because that is what this course is all aboutusing the concepts that you have learned in other courses. The principles that you learned about in your finance courses and the institutional details that you learned in your banking courses will be applied to the problems of managing banks, other depository institutions and other financial intermediaries such as insurance companies, pension funds and securities firms.
Other industries are changing rapidly because of technological development, and no industry is more affected by this electronic age than the finance industry. Banks, for example, use the massive computing power now available to manage their exposure to risk. That is possibly the most important aid that computers have given to banking and finance.
As you'll see in this course, banking institutions have been periodically subject to widespread failure over the past several centuries. No matter how hard the regulators try, it seems that financial institutions 'catch the flu' with regularity. The problem is that, when a bank fails, it usually takes with it the savings of many innocent bystanders and causes many profitable businesses to fail as well. Today China has many banks that are holding 'abnormal' or 'non-performing' debts. These provide such a threat to the stability of the financial system there that legislation is being promoted to separate commercial banking from investment banking. This separation was put into place in the US in the 1930s in the wake of huge numbers of bank failures. But now, 70 years later, in the US the boundaries between commercial banks and investment banks are being broken down.Banks now find that they must learn to handle cash flows carefully in order to meet all of the regulations to which they are subject. But, even more importantly, they must carefully consider the risks to which they are exposedprincipally, interest rate risk. A sharp change in interest rate levels, from whatever cause, can spell disaster for banking institutions. This risk cannot be eliminated, but it can be managed using sophisticated financial management and financial derivatives. So this course has a lot to say about the problem of managing risk.
With the studies in finance that you have already undertaken, I hope this course will put the final touches on your understanding so as to provide you with all the confidence you need to manage an important financial institution in today's risky world.
| A note about the developer of this course | |
Professor Robert Haney Scott was born and raised in western Kansasthe prairie country. He attended the University of Kansas and was a college teacher for a few years before he continued graduate studies. He received a PhD in Economics from Harvard University in 1961. He served on the faculty of the University of Washington's School of Business Administration from 1961 until 1987, when he took early retirement and assumed his current position as Professor of Finance at California State University, Chico. He is author or co-author of a dozen books in finance and has published numerous articles in both professional and popular journals. During his career he spent three years teaching and doing research in Europe, and five years teaching in Hong Kong and Macau.
| Deferment of studies | |
Click here and view Deferment of studies.
| About the School of Business and Administration | |
Click here and view the School of Business and Administration.
