Strategic Bank Management (AFCP863)

The global financial crisis of 2007-08 highlighted the dependence of the real economy on the financial sector, and how subtle flaws in bank regulation can result in a failure of the financial system as a whole. One response to the crisis has been more restrictive banking regulation. The effectiveness of this regulation is yet to be seen, however it has made the task of generating returns for bank shareholders significantly more challenging, further compounded by a global economy that has still not fully recovered. This elective will allow students to navigate the new dynamics of the financial system and the objectives of the various stakeholders within that system, and to create management frameworks that work effectively within the complex regulatory constraints on financial firms. The unit investigates the inherent trade-offs in the design of incentives and risk-adjusted performance measures, and guides students to create bank business strategies that can be operationalised via credit concentration limits, delegated authorities, etc. This elective also requires students to think critically about the evolution of the banking sector, and how traditional banks might need to adapt to counter the threats posed by disruptive new entrants into the marketplace.

Learning Outcomes

  1. Investigate the role of banks in the modern economy, and the tensions that exist between the aims of investors, customers, governments, employees, and the broader society.
  2. Critique how bank regulation operates as a tool of economic influence by regulating the money supply, using case studies on how pre- and post- 2008 financial regulation influenced the eventual evolution of the Global Financial Crisis.
  3. Examine the overlapping constraints now imposed on banks’ balance sheets, including prudential and liquidity regulation, accounting and transparency obligations, and risk appetite settings.
  4. Formulate coherent bank strategies and translate those further into risk appetite settings that can be cascaded into business performance measures and operational limits.
  5. Create appropriate reporting and governance frameworks, and formulate plans for migrating from a product-centric to a customer-centric view of a bank’s business.
  6. Review the competitive landscape for banking services, including those provided by non-bank entities and “shadow banks”, and the influence of current and emerging technical developments.

Topics:

  1. Overview and structure of the unit
  2. Introduction
  3. Banking, money and economic growth
  4. Bank regulation
  5. Mandated risk management tools
  6. Disruptive innovation

Prerequisite units:

Lecturer:

Paul Kennedy

Unit guide:

Strategic Bank Management - The link will provide a list of guides for this unit. If the desired term/location is not listed, please view the latest one available.

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