Course Description
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Understanding how commercial banks operate in the real world is vital whether you (your household or your business) are engaged in borrowing, lending, local or International financial transactions, training in financial markets or bank regulation. In addition, the course provides basic training and varied career options in commercial banking locally, regionally and internationally.
This course examines the role that commercial banks perform in an economy and highlights the basic principles of commercial bank management. The course profiles the financial services provided by commercial banks, as well as dealing with issues related to managing assets and mobilizing funds. As far as possible, the focus will be on applying the principles outlined to commercial bank operations in the context of developing country. The course also examines banking sector crises and public policy responses.
This course is presented in a format that targets a good balance between theory and practice. The theory will be covered through class lectures and various aspects of formal assignments. This course will focus considerably, but not exclusively, on Caribbean-wide experience with commercial banks. Practical aspects are emphasized in the use of case experience, analysis of a specific research topic, and visiting guest lecturers from the banking sector, where possible.
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Course Assessment
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The course assessment will be based on the following:
1. Mid-semester examination 15%
2. Research Project 25%
3. Final Examination 60% 4. Plagarism -100%
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Recommended Texts
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Peter S. Rose and Sylvia C. Hudgins, Bank Management and Financial Services, McGraw-Hill/Irwin, 6th edition, 2005. PSR-SCH. |
Additional Readings
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Barry Eichengreen and Carlos Arteta, "Banking Crises in Emerging Markets: Presumptions and Evidence", Center for International and Development Economics Research, Paper C00-115, (August 1, 2000).
.http://repositories.cdlib.org/iber/cider/C00-115.
Bank of Jamaica. Statistical Digests.
Daniel C. Hardy, “Are Banking Crises Predictable?”, Finance and Development, Vol. 39, 4, September 1998.
Douglas W. Diamond and Raghuram G. Rajan, “Liquidity Shortages and Banking Crises”, The Journal Of Finance, Vol. LX, No. 2, April 2005: 615-47.
Michael Gavin and Ricardo Hausmann, “The Roots of Banking Crises: The Macroeconomic Context”, Inter-American Development Bank, Working Paper 318, January 1996.
www.boj.org.jm
www.jba.org.jm
www.caibinc.info
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Course Outline
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1. Commercial Banks and Their Services: An Overview
- The financial system and competing financial service institutions
- What is a bank?
- Commercial banks: roles and services
- Commercial banks and their closest competitors
PSR-SCH, Ch. 1
2. Impact of Government Policy and Regulation on Commercial Banking
- The pros and cons of bank regulation
- Major banking laws
- The central banking system: Impacts on decisions and policies of
commercial banks
PSR-SCH, Ch. 2
3. The Organisational and Structure of Commercial Banks and the Banking
Industry
- Organisation and structure of commercial banks
- Corporate organisational structure in banking industry
- 21st century two alternative types of banking organisations
- Banking goals: Impact on operating cost, efficiency and performance.
PSR-SCH, Ch. 3
4. Measuring and Evaluating Commercial Bank Performance
- Evaluating bank performance
- The impact of size on bank performance
PSR-SCH, Ch. 5
5. Commercial Bank Asset-Liability Management Techniques
- Asset-liability management strategies
- Interest rate risk management and hedging
- The concept of duration and its limitation
- Using financial futures, options, swaps and other hedging tools
- The use of derivatives PSR-SCH, Chs. 6, 7 & 8
6. Commercial Bank Investment Portfolio and Liquidity Position
- Money market investment instruments
- Capital market investment instruments
- Determinants of choice of investments
- Investment maturity strategies
- Demand for and supply of liquidity
- Estimating liquidity needs PSR-SCH, Chs. 9 & 10
7. Management of Commercial Bank Sources of Funds
- Types of deposit and pricing of deposits
- Deposit pricing methods
- Management of commercial bank capital PSR-SCH, Chs. 11 & 14
8. Commercial Bank Lending
- Types of loans and regulations on lending
- Credit analyses: What makes a good loan?
- Types of business loans
- Analyzing and pricing business loan
- Consumer loans PSR-SCH, Chs. 15, 16 & 17
9. Banking Crises: Origin, Effects and Policy Responses
- Origin and causes of banking crises
- Effects of banking crises
- Policy responses to banking crises: Banking sector reform
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