1. The financial system
   1. Structure
   2. Main products
   3. Finance and development
2. Introduction to banking
   1. Main financial statements
   2. Loan-loss provisions
   3. Competition
   4. Shadow banking system
   5. Bank capital
   6. Bank risks
3. The role of information
   1. Asymmetric information
   2. Asymmetric information and financial products
   3. Market responses
4. Banks and the economy
   1. Economy, economic policy, markets and bank risks
   2. Procyclicality and the dynamics of banking crises
   3. Financial contagion
5. Banks and authorities
   1. Banks’ safety net
   2. Bail in and bail outs
   3. Capturing economic policy
6. Regulation
   1. Economic analysis
   2. Basel I, II & III
7. Supervision
   1. Micro-prudential
   2. Macro-prudential

This course

• describes the main products and functions of banks, as well as the risks they undertake in order to contribute to social welfare, using as vehicle their main financial statements,
• explores bank risk management, including the risks from asymmetric information,
• explores the multi-faceted interactions between banks, the financial system, governments, central banks and the economy,
• analyses the private incentives of all players, from bank employees all the way to the top management of the supervisory authorities,
• stresses the role of information technology and of other forces of change,
• describes the dynamics of banking crises,
• highlights the logical underpinnings of the complex institutional framework that governs the operation of banks,
• uses current economic and financial developments, both domestic and international, to tie the course to the real world.

After completing this course, students are expected to

• analyse critically banks’ financial statements,
• understand bank risks and functions,
• understand the role and dilemmas of the institutional framework,
• assess the likely impact of changes in the institutional framework and in the economy on bank strategies,
• combine banking logic with macroeconomics for complete financial analyses.

• Retrieve, analyse and synthesize data – economic and financial
• Decision-making
• Independent work
• Work in an international environment

Written exam: 100%

• Typically, the students are asked to analyse current developments and dilemmas pertaining to bank strategies and regulation/supervision.
• Occasionally, they are asked to comment on an recent article from the financial press.

Bonus 10% based on class participation.

– Recommended Bibliography: Instructor notes and policy aricles for the ECB, the Fed, the BIS.

– Related scientific journals: