FINA 465: Commercial Bank Practice and Policy
Spring 2013

MW 2:30 – 3:45 Section 001 BA 401
MW 4:00 – 5:15 Section 002 BA 401

Professor: Dr. Allen N. Berger
Office: Room 452, Moore School of Business
Phone: (803) 576-8440
Email: aberger@moore.sc.edu
Office Hours: MW 10:00 AM – 11:00 AM and 5:30 PM– 6:30 PM; and by appointment Extra office hours will be available before each of the three tests.

Course Overview:

This course is structured around the theme of risk management in banking. You will examine how banking institutions generate earnings and the nature of risks assumed in their operations. The focus of the subject matter is risk management. Topics to be covered: Why are financial intermediaries special? the role of depository institutions; financial crisis; risk of financial intermediation including interest rate risk, credit risk, off-balance sheet risk, liquidity risk; management of risks including liquid asset management and liability management, deposit insurance and other liability guarantees, capital adequacy, product and geographic diversification, and loan sales.

The objective of this course is to provide the student with the conceptual framework necessary to analyze and comprehend the current problems confronting managers of commercial banks and other depository institutions. The course materials do not dwell on the development of financial theories. It is assumed that the student comprehends the basic theoretical concepts of corporate finance, monetary theory, and financial accounting. Each class session will be structured to include lecture and discussion.

This class is fundamentally a RISK MANAGEMENT class that applies primarily to financial institutions and banks in particular. Risk management is the process by which managers identify, assess, monitor, and control risks associated with a financial institution’s activities.

Lecture Notes:

In order to reduce your note taking, lecture notes on the book chapters and financial crisis are currently available for the entire semester on Blackboard. Wall Street Journal (WSJ) notes will be posted after each class in which the WSJ is discussed.

Required Reading Materials:

Financial Institution Management: Risk Management Approach, Saunders, Anthony and Marcia Millon Cornett, 7th Edition, 2011. Chapters covered include: 1, 2, 7, 8, 9, 11 (skip pages 353-358), 12, 13, 17, 18, 19, 20, 21, and 25. No appendices except Chapter 1 Appendix 1A are required. You may also skip descriptions of financial institutions other than depository institutions. Please read the appropriate chapter before it is covered in class.

The Wall Street Journal. Please either subscribe at http://online.wsj.com/home-page or pick up free copies in the Moore School and read financial institution articles.

Recommended Materials:
Business Week
Fortune
Forbes
American Banker
ABA Banking Journal
The Economist
Financial Times
Banking Strategies
The Journal of Lending & Credit and Risk Management

Relevant Web Sites:
Textbook Website http://highered.mcgraw-hill.com/sites/0073530751/student_view0/index.html The Federal Reserve http://www.federalreserve.gov/
Federal Deposit Insurance Corporation http://www.fdic.gov/

Final Grade Computation:

Test 1 150 pts
Test 2 150 pts
Test 3 150 pts
TOTAL 450 pts

Tests are non-cumulative.

Tests will cover materials in the textbook, Wall Street Journal, and materials covered in class.

A review session will be held for each test in the class period before the test. Sample test questions will be reviewed, and the questions and answers will be posted on BlackBoard after each review session.

Tests consist primarily of short-answer questions.
Test 2 will include computations and students are required to bring their own calculators (graphing calculators and smartphones are not allowed). Formula sheet will be provided at the time of the test (do not bring formula sheet to the test).
All tests are closed book.

There is no final exam.
Test 3 will be held on the last day of class.
If there is a potential conflict with the last test, please let the professor know immediately.

Minimum grade distribution
90%-100% A
88%-89% B+
80%-87% B
78%-79% C+
70%-77% C
68%-69% D+
60%-67% D
0%-59% F

Professor may be slightly more generous and grade on a curve, but will not go below the minimum grade distribution.

NO EXTRA CREDIT AVAILABLE

Class Evaluations:

Class evaluations will be on line. Class time will be provided to complete the evaluations. Please bring your laptop to class on Monday, April 22nd to complete them.

Learning Outcomes:

The students are expected to become knowledgeable regarding financial intermediary specialness; the roles of depository institutions; the financial crisis; the risks of financial intermediation including interest rate risk, credit risk, off-balance sheet risk, and liquidity risk; the management of risks including liquid asset management and liability management, deposit insurance and other liability guarantees, capital adequacy, product and geographic diversification, and loan sales, and to demonstrate this knowledge on class examinations.

READ THIS: DO NOT email or phone the professor questions or inquiries about grades. Any questions or comments regarding grades must be done in person. Before, during, or after class and all office hours are appropriate times to discuss grades. Emails and phone calls are inappropriate venues by which to discuss such subjects. Violation of this policy will result in a one letter grade deduction in the student’s final grade, per incident.

Policies:

Students are expected to follow the Code of Student Conduct for Undergraduate Students for the Moore School and the University of South Carolina Honor Code, both of which are detailed below.

Darla Moore School of Business
Code of Student Conduct for Undergraduate Students

The Darla Moore School of Business is recognized globally for educating students who are prepared to become responsible business and civic leaders. An effective learning environment where students and faculty value integrity, professionalism and diligence is foundational to this mission.
Consistent with these values, the Student Leadership Council and the faculty of the Darla Moore School of Business expect students to:
• spend a minimum of two hours outside of class studying for each hour of classroom time;
• exhibit classroom behavior that is respectful to faculty and fellow students;
• refrain from the use of phones and other electronic equipment during class, unless permitted by the instructor;
• arrive at class on time, actively participate in class, and not leave class early;
• keep up with assigned readings and complete assignments on time;
• contribute fully to team assignments;
• respect the university’s staff and be responsible stewards of its facilities; and
• abide by the University of South Carolina Honor Code
University of South Carolina Honor Code

It is the responsibility of every student at the University of South Carolina Columbia to adhere steadfastly to truthfulness and to avoid dishonesty, fraud, or deceit of any type in connection with any academic program. Any student who violates this Honor Code or who knowingly assists another to violate this Honor Code shall be subject to discipline.
The Honor Code is intended to prohibit all forms of academic dishonesty and should be interpreted broadly to carry out that purpose. The following examples illustrate conduct that violates this Honor Code, but this list is not intended to be an exhaustive compilation of conduct prohibited by the Honor Code:
1. Giving or receiving unauthorized assistance, or attempting to give or receive such assistance, in connection with the performance of any academic work.
2. Unauthorized use of materials or information of any type or the unauthorized use of any electronic or mechanical device in connection with the completion of any academic work.
3. Access to the contents of any test or examination or the purchase, sale, or theft of any test or examination prior to its administration.
4. Use of another person’s work or ideas without proper acknowledgment of source.
5. Intentional misrepresentation by word or action of any situation of fact, or intentional omission of material fact, so as to mislead any person in connection with any academic work (including, without limitation, the scheduling, completion, performance, or submission of any such work).
6. Offering or giving any favor or thing of value for the purpose of influencing improperly a grade or other evaluation of a student in an academic program.
7. Conduct intended to interfere with an instructor’s ability to evaluate accurately a student’s competency or performance in an academic program.

Whenever a student is uncertain as to whether conduct would violate this Honor Code, it is the responsibility of the student to seek clarification from the appropriate faculty member or instructor of record prior to engaging in such conduct.

Contribution: Contribution is a necessary and essential ingredient in the real business community. Contribution includes comments, questions, and article discussions.
Academic Honesty: All college and department policies on academic honesty will be strictly enforced. The Student Handbook and Policy Guide establishes rights to which the student is entitled and the responsibilities, which the student must assume. Along with preparing for and attending class, each student has the responsibility of promoting high academic standards. Academic dishonesty includes: (a) cheating, (b) fabrications and falsifications, (c) multiple submissions, (d) plagiarism, (e) complicity in academic dishonesty. Inappropriate classroom behavior may result in the student being withdrawn from the class.
Attendance: Consistent with University Policy as stated in the Student Handbook. Each student is allowed three (3) unexcused absences from class period. Each absence in excess of three will result in a one-letter grade reduction in the final grade. Think of this class as your job – arrive on time and be prepared to participate. All student activities associated with university events (sports absences, student activities requiring absence from the university, etc.) are considered excused, but MUST be cleared with the professor PRIOR to their occurrence.
Americans With Disability Act: Every reasonable attempt will be made to remove any physical barrier, which may hamper the ability of an individual to learn in this classroom. Anyone who has a physical or learning limitation that would impact attendance, preparation, participation, or timely completion of assignments should feel welcome to discuss this limitation with the professor at the beginning of the semester.
Dropping the Course: College policies will be followed. Please consult the schedule for exact dates for dropping a course without penalty.

|SPRING 2013 |
|January 14, Mon. |Classes begin, course overview |
|January 16, Wed. |Chapter 1 |
|January 18, Fri. |Last day to change a course schedule or drop a |
| |course without a grade of "W" being recorded |
|January 21, Mon. |Dr. Martin Luther King, Jr. Service Day - no classes Chapter 1 cont’d |
|January 23, Wed. |Chapter 2 |
|January 28, Mon. |Chapter 2 cont’d |
|January 30,Wed. |Financial Crisis (Chapter 1 Appendix 1A) |
|February 4, Mon. |Financial Crisis cont’d |
|February 6, Wed. |Chapter 7 |
|February 11, Mon. |Review |
|February 13, Wed. |Test 1 |
|February 18, Mon. |Go over Test 1 |
|February 20, Wed. |Chapter 8 |
|February 25, Mon. |Chapter 9 |
|February 27, Wed. |Chapter 11 |
|March 4, Mon. |Last day to drop course or withdraw without a |
|March 4, Mon. |grade of “WF” being recorded |
| |Chapter 12 |
|March 6, Wed. |Spring break - no class |
|March 11, Mon. |Spring break - no class |
|March 13, Wed. |Chapter 13 |
|March 18, Mon. |Chapter 17 |
|March 20, Wed. |Review |
|March 25, Mon. |Test 2 |
|March 27, Wed. |Go over Test 2 |
|April 1, Mon. |Chapter 18 |
|April 3, Wed. |Chapter 19 |
|April 8, Mon. |Chapter 20 |
|April 10, Wed. |Chapter 21 |
|April 15, Mon. |Chapter 21 cont’d |
|April 17, Wed. |Class Evaluations, Chapter 25 |
|April 22, Mon. |Review |
|April 24, Wed. |Test 3 (in class) |
|April 29, Mon. | |
| | |
| | |

Brief Biography of Professor Allen N. Berger

Allen N. Berger is the H. Montague Osteen, Jr., Professor in Banking and Finance, Moore School of Business, University of South Carolina; Senior Fellow, Wharton Financial Institutions Center; Extramural Fellow, CentER, Tilburg University; and Secretary/Treasurer, Financial Intermediation Research Society. Mr. Berger also currently serves on the editorial boards of 5 professional economics and finance journals. Mr. Berger was Senior Economist from 1989 to 2008 and Economist from 1982-1989 at the Board of Governors of the Federal Reserve System. He is also past editor of the Journal of Money, Credit, and Banking, and has co-edited 6 special issues of various journals and the Oxford Handbook of Banking. He has published more than 100 professional articles, including papers in the Journal of Political Economy, American Economic Review, Journal of Monetary Economics, Journal of Finance, Journal of Financial Economics, and Review of Financial Studies. His research covers a variety of topics related to financial institutions. He received a Ph.D. in Economics from the University of California, Berkeley in 1983, and a B.A. in Economics from Northwestern University in 1976.