Australian School of Business Banking and Finance

FINS3630 BANK FINANCIAL MANAGEMENT

Course Outline Semester 2, 2012

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Table of Contents
PART A: COURSE-SPECIFIC INFORMATION 1 2 2.1 2.2 2.3 2.4 2.5 3 STAFF CONTACT DETAILS COURSE DETAILS Teaching Times and Locations Units of Credit Summary of Course Course Aims and Relationship to Other Courses Student Learning Outcomes LEARNING AND TEACHING ACTIVITIES 3 3 3 3 3 3 3 4 4 4 5 5 5 5 7 8 9 11 11 11 11 11 12 12 12 12 14

3.1 Approach to Learning and Teaching in the Course 3.2 Learning Activities and Teaching Strategies 4 ASSESSMENT 4.1 Formal Requirements 4.2 Assessment Details 5 6 7 8 9 9.1 9.2 9.3 9.4 9.5 10 11 COURSE RESOURCES COURSE EVALUATION AND DEVELOPMENT COURSE SCHEDULE ACADEMIC HONESTY AND PLAGIARISM STUDENT RESPONSIBILITIES AND CONDUCT Workload Attendance General Conduct and Behaviour Occupational Health and Safety Keeping Informed SPECIAL CONSIDERATION AND SUPPLEMENTARY EXAMINATIONS STUDENT RESOURCES AND SUPPORT

PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT

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PART A: COURSE-SPECIFIC INFORMATION 1 STAFF CONTACT DETAILS
Lecturer-in-charge: Dr. Lixiong Guo Room: ASB East Wing 363 (Note: Please use the ASB entrance next to the University Bookstore) Phone No: 9385 5773 Email: lixiong.guo@unsw.edu.au Consultation Times: Tuesday 4:30 pm – 6:00 pm (or by appointment) Tutor names: A full list of tutors will be posted on Course Website.

2 COURSE DETAILS
2.1 Teaching Times and Locations

Lectures start in Week 1(to Week 12): The Time and Location are: Stream A: Tue 9:00 – 11:00 Rex Vowels Theatre Stream B: Tue 14:00 –16:00 Law Theatre G04 Tutorials start in Week 2 (to Week 13). Please go to http://www.timetable.unsw.edu.au/current/FINS3630.html for a full list of tutorials, times and locations.

2.2

Units of Credit

The course is worth 6 units of credit. There is no parallel teaching in this course.

2.3

Summary of Course

This course provides an introduction to the theory and practice of banking from a financial management perspective. We will discuss the economics of financial intermediation, regulatory environments of banks, basics of central banking, capital adequacy, asset management, liability and liquidity management, risk measurement and management, financial innovations and systemic risk, and other timely topics as time permits.

2.4

Course Aims and Relationship to Other Courses

This course aims to equip students who plan to work in commercial and investment banks with a fundamental understanding of the complexity of decision-making in modern banks and some necessary tools for assessing and managing various risks. It should also be helpful for students who will work in investments, corporate finance, and

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other functional areas of finance to better understand the risk, performance and inner working of banks as well as their impacts on other sectors of the economy. Students are expected to have taken an introductory course in each of the following three subjects: statistics, accounting and derivatives.

2.5

Student Learning Outcomes

By the end of this course, you should be able to: 1. 2. 3. 4. 5. 6. Describe the important economic functions played by banks Analyze a bank‟s financial statement and performance Identify the main types of risk confronted by banks Apply relevant techniques to measure and manage these risks Engage in educated discussions on contemporary banking issues Collaborate effectively on completing a professional report

ASB Graduate Attributes This course contributes to your development of the following Australian School of Business Graduate Attributes, which are the qualities, skills and understandings we want you to have by the completion of your degree:

Learning Outcomes 1,2,3,4 5,6 6 1,5,6 1,2,3,4,5,6 1,2,3,4,5,6

ASB Graduate Attributes Critical thinking and problem solving Communication Teamwork and leadership Social, ethical and global perspectives In-depth engagement with relevant disciplinary knowledge Professional skills

ASB GA No. 1 2 3 4 5 6

To see how the ASB Graduate Attributes relate to the UNSW Graduate Attributes, refer to the ASB website (Learning and Teaching >Graduate Attributes).

3 LEARNING AND TEACHING ACTIVITIES
3.1 Approach to Learning and Teaching in the Course

We seek to create an interesting, challenging, relevant, and engaging education experience. To help achieve this objective, we will create a climate of engagement, dialogue and ongoing feedback between students and lecturers regarding the content, teaching strategy, learning experience and outcomes. We will also use multiple

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teaching methods and assignments to help students to develop their critical thinking skills besides learning new knowledge. At the same time, we expect students to read the relevant chapters and cases before each lecture and actively participate in class discussions.

3.2

Learning Activities and Teaching Strategies

The lectures build from the relevant core readings to set out the main ideas, theories, and conceptual frameworks for the course. Lectures include interactive learning processes and will synthesize materials from a range of sources. This interactive learning experience is not replicable by reading lecture notes on your own. Also, lecture notes only summarize the key points of each lecture, not everything we cover in the lecture is on lecture notes. However, everything we cover in the lecture can be on the exam. Hence, we expect that you will come to and be prepared for each lecture. You miss lectures at your own risk. For lectures using HBS cases, it is very important for students to carefully read the case and think about the assigned case questions before coming to the lecture.

4 ASSESSMENT
4.1 Formal Requirements

In order to pass this course, you must:  achieve a composite mark of at least 50; and  make a satisfactory attempt at all assessment tasks (see below).

4.2

Assessment Details

Assessment Task

Weighting

Learning Outcomes assessed 1-6 5,6 1-6 1-6

Tutorial Participation Oral presentation Group Project Mid-session Exam Final Exam Total

5% 5% 15% 25%

ASB Graduate Attributes assessed 1-6 2,3,4,6 1,2,3,5,6 1,5

Length

Due Date

Week 2-13 15 minutes Instruction below 90 minutes 3 hours NA By noon of Mon, Oct 15 2:20 - 4:00 pm Sat, August 25 University Exam Period

50% 100%

1-6

1,5

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Tutorial Participation Each attendance earns 0.5 marks for up to a maximum of 5 marks in total for the entire semester. However, to earn the 0.5 marks, a student can NOT be more than 20 minutes late for the tutorial session. Since there are 12 tutorials in total, this policy implies that each student can miss up to two tutorials (including the tutorial that is canceled on Monday, October 1) without penalty. In other words, if you are in a Monday tutorial, you can only miss one of the rest 11 tutorials without penalty. Oral Presentation Students should form groups of 2-3 students (3 is ideal) by the end of the first tutorial session in Week 2. This will be your group for both the oral presentation and the group project. Each group will then need to sign up for a 15-minute oral presentation to be given in the tutorial session. With some flexibility per the tutor, one presentation will be scheduled each week from Week 3 to Week 13. The purpose of the presentation is to introduce to the class a story or an article from your most recent financial media reading or a significant event in the past. For example, the JP Morgan $2 billion trading losses just revealed in May, 2012, the troubles in Spain‟s banks, and the bankruptcy of Lehman Brothers in 2008, etc. The most likely places to find such information are Wall Street Journal, Bloomberg, New York Times, Financial Times, and a Google search. The presentation should end by addressing the following two questions. 1. How is the article related to what we have learned in the lectures? 2. What do you not understand in the article? You are required to say one thing for each question. If time permits, you can say more but it is not required. The tutor can then organize the class to have a 5-minute short discussion on Question 2 to see if the tutor or other students have an answer. You will be evaluated based on other students‟ interest in your topic, your preparation, your delivery of your message and whether you have addressed the two questions above. Group report You and your group members will complete a group project during the semester. The assignment will be given in Week 5 and the final report is due by noon on Monday, October 15 (Week 13). You should submit an electronic copy of your final report to your tutor by the deadline. Late submission will not be accepted. You are also encouraged to submit a hard copy during your tutorial session in Week 13 but there is not deadline for the hard copy. The text part of your final report should be double spaced using 11 or 12 point font and between 5 and 7 pages long. However, if you have done a lot of work that you want to show, you can go up to a maximum of 15 pages excluding tables and figures. There is no page limit on tables and figures which should be put at the end of the report.

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Mid-session Exam The Mid-session exam is schedule to take place from 2:20 pm to 4:00 pm on Saturday, August 25, 2012. Students should arrive at 2:00 pm to allow time for entering the rooms. The location of the exam will be announced on Blackboard. The exam will be 90-minute long and closed book with mostly multiple choice questions (MCQs). It covers material from Week 1 to Week 4. The lecture in Week 7 is canceled to compensate you for sitting in the mid-session exam on a Saturday but tutorials in that week will continue as normal. Final Exam The final exam covers material from Week 5 through Week 12. It will be a 3-hour long, closed book exam with all multiple choice questions (MCQs). Please refer to the University schedule for the time and location of the exam. Quality Assurance The ASB is actively monitoring student learning and quality of the student experience in all its programs. A random selection of completed assessment tasks may be used for quality assurance, such as to determine the extent to which program learning goals are being achieved. The information is required for accreditation purposes, and aggregated findings will be used to inform changes aimed at improving the quality of ASB programs. All material used for such processes will be treated as confidential and will not be related to course grades.

5 COURSE RESOURCES
Blackboard Resources:       Latest announcement Lecture notes posted one day before the lecture Links to download HBS cases Handouts and additional reading materials Mid-session Exam Marks A discussion forum

The Prescribed Textbook for this course is: Anthony Saunders, Marcia Cornett, “Financial Institutions Management – A Risk Management Approach”, 7th Edition, McGraw-Hill 2011 Other References:  Lange et al., “Financial Institutions Management”, 2nd edition, McGraw-Hill 2007. o This book provides some institutional details for Australian financial institutions.



Koch & MacDonald, “Bank Management”, 6th edition, Thomson South-Western, 2006.

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o

Chapter 2 of this book has a section on “Evaluating bank performance: an application” which can be helpful for studying bank performance evaluation.



Hull, “Options, Futures, And Other Derivatives”, 8th edition, Pearson, 2012.

6 COURSE EVALUATION AND DEVELOPMENT
Each year feedback is sought from students and other stakeholders about the courses offered in the School and continual improvements are made based on this feedback. UNSW's Course and Teaching Evaluation and Improvement (CATEI) Process is one of the ways in which student evaluative feedback is gathered. In this course, we will seek your feedback through informal chats with students throughout the semester the end of semester CATEI evaluation. You are also encouraged to contact Dr. Guo directly by email or through face-to-face meetings to express your concerns and suggestions for the course. As a result of past student feedbacks, we keep the Group Project component of the assessment introduced in S2, 2011 because it was quite popular. At the same time, the weight on Group Project is increased from 10% to 15% based on students‟ feedbacks that they spent a lot of time on the project and needed to be rewarded more. As a new development, this is first time that we incorporate two Harvard Business School (HBS) Cases into the course to improve the learning experience of students and to develop students‟ professional skills. We look forward to hearing your feedbacks on this new development.

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7 COURSE SCHEDULE
Lecture Schedule Lectures start in Week 1 and finish in Week 12.

Week
Week 1 17 July Week 2 24 July Week 3 31 July Week 4 7 August Week 5 14 August Week 6 21 August Week 7 28 August

COURSE SCHEDULE Lecture Topic Readings
Overview of Financial System and Risk Interest Rate Risk (I) Liquidity Risk and Management Commercial Banks Module (I) Commercial Banks Module (II) Investment Banks Module (I) Investment Banks Module (II) + Credit Risk I NO LECTURES Chapter 1 & 7, Appendix 8B Chapter 8 &17 Chapter 2 &13 Appendix 2B Chapter 20 Chapter 4

HBS Case Preparation

Citigroup 2007 Case Citigroup 2007 Case JP Morgan Chase and Bear Stearns Case JP Morgan Chase and Bear Stearns Case

Chapter 11

Mid-Session Break: Week 3-9 September
Week 8 11 Sept Week 9 18 Sept Week 10 25 Sept Week 11 2 October Week 12 9 October Week 13 16 October Credit Risk (I) + Credit Risk (II) Interest Rate Risk (II) Market Risk Foreign Exchange Risk Securitization NO LECTURES Chapter 11 &12 Chapter 9 Chapter 10 Chapter 14 Chapter 26

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Tutorial Schedule Tutorials start in Week 2 and finish in Week 13. Important Note to Students in Monday Tutorials:
Tutorial sessions on Monday, Oct 1 will be canceled because it is a holiday. The tutors of those sessions should survey the class beforehand to see if some students want to reschedule the session. The tutor should try his/her best to accommodate such requests but attendance will not be checked. At the same time, students are encouraged to go to other tutorial sessions offered in that week on a first-come-first-serve basis as space permits. I will notify tutors in other sessions to prepare to accept students from Monday tutorials in that week.

Week
Week 1 16 July Week 2 23 July Week 3 30 July Week 4 6 August Week 5 13 August Week 6 20 August Week 7 27 August

TUTORIAL SCHEDULE Topic
NO TUTORIALS Overview of Financial Systems and Risk Repricing Models of Interest Rate Risk, Liquidity risk and management Commercial Banks Commercial Banks Investment Banks Credit Risk I

Reference

Chapter 8 & 17 Chapter 2 & 13, Citigroup 2007 Case Chapter 20, Citigroup 2007 Case Chapter 4, JP Morgan & Bear Stearns Case Chapter 11, JP Morgan & Bear Stearns Case

Mid-Session Break: Week 3-9 September
Week 8 10 Sept Week 9 17 Sept Week 10 24 Sept Week 11 1 October Week 12 8 October Week 13 15 October Review Solutions to Mid-session Exam Credit Risk I + Credit Risk II Interest Rate Risk II Market Risk Foreign Exchange Risk Securitization Chapter 11 & 12 Chapter 9 Chapter10 Chapter 14 Chapter 26

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PART B: KEY POLICIES, STUDENT RESPONSIBILITIES AND SUPPORT 8 ACADEMIC HONESTY AND PLAGIARISM
The University regards plagiarism as a form of academic misconduct, and has very strict rules regarding plagiarism. For UNSW policies, penalties, and information to help you avoid plagiarism see: http://www.lc.unsw.edu.au/plagiarism/index.html as well as the guidelines in the online ELISE and ELISE Plus tutorials for all new UNSW students: http://info.library.unsw.edu.au/skills/tutorials/InfoSkills/index.htm. To see if you understand plagiarism, do this short quiz: http://www.lc.unsw.edu.au/plagiarism/plagquiz.html For information on how to acknowledge your sources and reference correctly, see: http://www.lc.unsw.edu.au/onlib/ref.html

For the ASB Harvard Referencing Guide, see the ASB Referencing and Plagiarism webpage (ASB >Learning and Teaching>Student services> Referencing and plagiarism)

9 STUDENT RESPONSIBILITIES AND CONDUCT
Students are expected to be familiar with and adhere to university policies in relation to class attendance and general conduct and behaviour, including maintaining a safe, respectful environment; and to understand their obligations in relation to workload, assessment and keeping informed. Information and policies on these topics can be found in the „A-Z Student Guide‟: https://my.unsw.edu.au/student/atoz/A.html. See, especially, information on „Attendance and Absence‟, „Academic Misconduct‟, „Assessment Information‟, „Examinations‟, „Student Responsibilities‟, „Workload‟ and policies such as „Occupational Health and Safety‟. .

9.1

Workload

It is expected that you will spend at least ten hours per week studying this course. This time should be made up of reading, research, working on exercises and problems, and attending classes. In periods where you need to complete assignments or prepare for examinations, the workload may be greater. Over-commitment has been a cause of failure for many students. You should take the required workload into account when planning how to balance study with employment and other activities.

9.2

Attendance

Your regular and punctual attendance at lectures and seminars is expected in this course. University regulations indicate that if students attend less than 80% of scheduled classes they may be refused final assessment.

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9.3

General Conduct and Behaviour

You are expected to conduct yourself with consideration and respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students may be asked to leave the class. More information on student conduct is available at: https://my.unsw.edu.au/student/atoz/BehaviourOfStudents.html

9.4

Occupational Health and Safety

UNSW Policy requires each person to work safely and responsibly, in order to avoid personal injury and to protect the safety of others. For more information, see http://www.ohs.unsw.edu.au/.

9.5

Keeping Informed

You should take note of all announcements made in lectures, tutorials or on the course web site. From time to time, the University will send important announcements to your university e-mail address without providing you with a paper copy. You will be deemed to have received this information. It is also your responsibility to keep the University informed of all changes to your contact details.

10 SPECIAL CONSIDERATION AND SUPPLEMENTARY EXAMINATIONS
You must submit all assignments and attend all examinations scheduled for your course. You should seek assistance early if you suffer illness or misadventure which affects your course progress. General Information on Special Consideration: 1. All applications for special consideration must be lodged online through myUNSW within 3 working days of the assessment (Log into myUNSW and go to My Student Profile tab > My Student Services channel > Online Services > Special Consideration). You will then need to submit the originals or certified copies of your completed Professional Authority form (pdf - download here) and other supporting documentation to Student Central. For more information, please study carefully the instructions and conditions at: https://my.unsw.edu.au/student/atoz/SpecialConsideration.html. 2. Please note that documentation may be checked for authenticity and the submission of false documentation will be treated as academic misconduct. The School may ask to see the original or certified copy. 3. Applications will not be accepted by teaching staff. The lecturer-in-charge will be automatically notified when you lodge an online application for special consideration.

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4. Decisions and recommendations are only made by lecturers-in-charge (or by the Faculty Panel in the case of UG final exam special considerations), not by tutors. 5. Applying for special consideration does not automatically mean that you will be granted a supplementary exam or other concession. 6. Special consideration requests do not allow lecturers-in-charge to award students additional marks.

ASB Policy on requests for Special Consideration for Final Exams in Undergraduate Courses: The policy of the School of Banking and Finance is that the lecturer-in-charge will need to be satisfied on each of the following before supporting a request for special consideration: 1. Does the medical certificate contain all relevant information? For a medical certificate to be accepted, the degree of illness, and impact on the student, must be stated by the medical practitioner (severe, moderate, mild). A certificate without this will not be valid. 2. Has the student performed satisfactorily in the other assessment items? Satisfactory performance would require at least having taken the mid-session exam and meeting the obligation to have attended 80% of tutorials. 3. Does the student have a history of previous applications for special consideration? A history of previous applications may preclude a student from being granted special consideration. Special Consideration and the Final Exam: Applications for special consideration in relation to the final exam are considered by an ASB Faculty panel to which lecturers-in-charge provide their recommendations for each request. If the Faculty panel grants a special consideration request, this will entitle the student to sit a supplementary examination. No other form of consideration will be granted. The following procedures will apply: 1. Supplementary exams will be scheduled centrally and will be held approximately two weeks after the formal examination period. The dates for ASB supplementary exams for Session 1, 2012 are: 28 November 2012 – exams for the School of Accounting 29 November 2012 – exams for all Schools except Accounting and Economics 30 November 2012 – exams for the School of Economics If a student lodges a special consideration for the final exam, they are stating they will be available on the above dates. Supplementary exams will not be held at any other time. 2. Where a student is granted a supplementary examination as a result of a request for special consideration, the student‟s original exam (if completed) will be ignored and only the mark achieved in the supplementary examination will count towards the final grade. Failure to attend the supplementary exam will not entitle the student to have the original exam paper marked and may result in a zero mark for the final exam.

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If you attend the regular final exam, you are extremely unlikely to be granted a supplementary exam. Hence if you are too ill to perform up to your normal standard in the regular final exam, you are strongly advised not to attend. However, granting of a supplementary exam in such cases is not automatic. You would still need to satisfy the criteria stated above. The ASB‟s Special Consideration and Supplementary Examination Policy and Procedures for Final Exams for Undergraduate Courses is available at: http://www.asb.unsw.edu.au/currentstudents/resources/forms/Documents/supplementa ryexamprocedures.pdf. Special consideration and assessments other than the Final exam: Special consideration for mid-session exam follows the similar guidelines for that for final exam. It will only be granted if the student is ill on the day of the exam with valid medical certificate presented afterwards. All applications should be launched by emailing or calling the lecture-in-charge before the exam takes place. Late applications are not accepted. Other cases will be judged on a case by case basis with no guarantee of approval.

11 STUDENT RESOURCES AND SUPPORT
The University and the ASB provide a wide range of support services for students, including:  ASB Education Development Unit (EDU) http://www.asb.unsw.edu.au/learningandteaching Academic writing, study skills and maths support specifically for ASB students. Services include workshops, online and printed resources, and individual consultations. EDU Office: Room GO7, Ground Floor, ASB Building (opposite Student Centre); Ph: 9385 5584; Email: edu@unsw.edu.au  ASB Student Centre http://www.asb.unsw.edu.au/requests Advice and direction on all aspects of admission, enrolment and graduation. Ground Floor, West Wing, ASB Building; Ph: 9385 3189  Blackboard eLearning Support: For online help using Blackboard, follow the links from www.elearning.unsw.edu.au to UNSW Blackboard Support / Support for Students. For technical support, email: itservicecentre@unsw.edu.au; ph: 9385 1333  UNSW Learning Centre (www.lc.unsw.edu.au ) Academic skills support services, including workshops and resources, for all UNSW students. See website for details.  Library training and search support services: http://info.library.unsw.edu.au/web/services/services.html  IT Service Centre: Technical support for problems logging in to websites, downloading documents etc. https://www.it.unsw.edu.au/students/index.html UNSW Library Annexe (Ground floor)  UNSW Counselling and Psychological Services (http://www.counselling.unsw.edu.au) Free, confidential service for problems of a personal or academic nature; and workshops on study issues such as „Coping With Stress‟ and „Procrastination‟. Office: Level 2, Quadrangle East Wing; Ph: 9385 5418

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

Student Equity & Disabilities Unit (http://www.studentequity.unsw.edu.au) Advice regarding equity and diversity issues, and support for students who have a disability or disadvantage that interferes with their learning. Office: Ground Floor, John Goodsell Building; Ph: 9385 4734

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