Management of Banks and Financial Institutions

Instructor: Ashok Thampy

Term: IV
Programme: PGP 2018-20
Credit: 3

Objective:
This course aims to equip students with an understanding of the issues in the management
of financial institutions. Financial institutions are subject to risk on both sides of their
balance sheet and this course will deal extensively with the techniques for measuring and
managing these risks. The regulation of financial services is also be dealt with in some
detail.

Course outline:
Topics Sessions
1. Overview of the financial system (2)
Role of the financial system-historical developments-market structure
Ref: Indian Financial System-Ch.2, MY Khan
Financial Institutions Management, Ch. 1, SC

2. Analyzing bank performance and valuation (2)

Ref: Financial Institutions Management-Ch 2, SC
Bank Management-Ch. 2,3 T. Koch
Valuation: Measuring and Managing Value of Companies-Ch. 16, Tom Copeland,
Tim Koller and Jack Murrin

3. Valuation and merger analysis (2)

Case: Finansbank (HBS)

4. Interest rate and liquidity risk for banks (2)

Interest rate risk management for banks
Maturity model-duration gap-repricing gap models
Ref: Financial Institutions Management-Ch. 8,9,17,24

5. Managing interest rate risk with swaps (1)

Ref: Financial Institutions Management-Ch. 24
Case: Banc One Corp: Asset and Liability Management

6. Bank for International Settlements norms for capital standards (2)

Issues in capital management, capital adequacy ratios and BIS standards
Ref: Financial Institutions Management-Ch. 20
BIS publications
7. Securitization and special issues in valuing securitized instruments (1)
Ref: Financial Institutions Management-Ch. 25,26

8. Credit risk management (3)

Different approaches to evaluating credit risk such as Creditmetrics, KMV model
Ref: : Financial Institutions Management-Ch.11,12

9. Credit derivatives and innovations in structuring products (2)

Ref: Financial Institutions Management, Ch.24
Case: First American Bank(HBS)

10. Lessons from financial failure

Case: Tip of the iceberg:JP Morgan Chase and Bear Stearns (HBS) (2)
Case: What happened to Citigroup? (HBS)

11. Financial technologies and financial services (1)

Ref: Redrawing the lines of FinTech’s growing influence on financial services,
PWC Global Fintech Report, 2017

References:
Anthony Saunders and Marcia Cornett, Financial Institutions Management: A Risk
Management Approach, Irwin McGraw Hill (SC)
Timothy W. Koch and Scott MacDonald, Bank Management, Thomson South
Western.(KM)
Meir Kohn, Financial Institutions and Markets, Tata McGraw Hill
M. Y. Khan, Indian Financial System, Tata McGraw Hill
L. M. Bhole, Financial Institutions and Market, Tata McGraw Hill

Project:
The project will involve the analysis of a bank. The project includes performing a
financial ratio analysis and valuation of a bank or non-bank finance company.

Evaluation: Midterm - 40%, Project - 20%, Final - 40%

Examinations: Closed-book