Modern bank management focuses on bank risk management. The banking industry is considered more vulnerable compared to other industries. Banks face a multitude of risks that are more threatening to the banking sector such as interest rate risk, credit risk, market risk and liquidity risk. The central role that financial institutions have in the workings of the economy require such emphasis.  Banks face intense competition not only locally among the banking system in each country but also  from other financial institutions internationally. The emphasis on financial stability is evident from the enactment of the Basel Agreement and the regulations emanating from BIS since 1996. Students in this course will be exposed to material pertaining to the identification of bank risks, the measurement of their consequence and the hedging methods available.  Bank risks will be presented according to  the seriousness  of their impact: Interest rate risk, credit risk, market risk, capital adequacy risk will be analyzed thoroughly and to a lesser extent the off balance sheet risk, FX risk, liquidity risk and operational risk.

Upon successful completion of the course, the students will be able to:

• Understand the challenges that banks are facing
• Predict the effect of interest rate changes on the profitability and sustainability of banks
• Understand the kind of risk which banks are confronted with when economic events happen
• Measure and hedge banking interest rate risk
• Measure and hedge credit risk
• Measure and hedge market risk
• Understand the sources and consequences of liquidity, OBS and operational risk
• Evaluate bank capital adequacy
• Understand the securitization process of bank assets