| Unit name | Introduction to the microeconomic foundations of banking |
|---|---|
| Unit code | EFIMM0051 |
| Credit points | 15 |
| Level of study | M/7 |
| Teaching block(s) |
Teaching Block 1 (weeks 1 - 12) |
| Unit director | Dr. Tobias Dieler |
| Open unit status | Not open |
| Pre-requisites |
None |
| Co-requisites |
None |
| School/department | School of Accounting and Finance - Business School |
| Faculty | Faculty of Social Sciences and Law |
The objective of this module is to familiarize students with the banking industry and provide them with the analytical skills to critically assess banking from both a regulator’s perspective and a banker’s perspective. This is achieved by covering the following topics both descriptively and theoretically: How is a bank different from a real firm?; What are the different types of banking?; Which services do banks provide to its customers and to the economy as a whole?; The role of information in banking.; What is the role of central banks?; How can banks be regulated to maximize social welfare?; What is the risk/negative externality of an insolvent bank?
On completion of this unit students should be able to (inter alia): 1.Demonstrate a comprehension of principal features of the banking industry; 2.Demonstrate a critical awareness of the role of banks for different stakeholders and the economy as whole; 3.Critically reflect on and discuss the role of the government, regulation, and government interventions into financial systems; 4.Use the analytical tools provided by information economics to critically assess past and upcoming institutional features in the banking industry.
Teaching takes place in a combination of lectures and tutorials. The eight two hours lectures will take place in a traditional lecture setting, all efforts will be made to ensure lectures are as engaging and interactive as possible with the active use of student questioning, and student participation. Complementary to the lectures there are four one hour tutorials which are intended to provide students with a forum in which they can further their understanding. Lecture notes, assignments and sample solutions to assignments will be available online.
Summative assessment
(1) 40% Group assignments.
Over the course of the unit, students will be given four assignments. Two of which are analytical exercises to work on in groups of 2-3 students and two of them are presentations of current topics in banking. The assignments will draw on the description of institutional features of the banking industry and theory from the lectures. The objective is to enable students to use the theory introduced in lectures to apply them to the most common and latest phenomena in banking (ILO1 -4). On each assignment, the group receives one mark which is valid for all students of the group. Sample solutions to the assignments will be made available right after the due date of the assignment. This provides students with a direct feedback about their current standing in terms of the course material as the course progresses. Furthermore, students will have the opportunity to discuss their assignments with a tutor in the tutorial which provides them with additional specific feedback.
Pedagogic rationale: The questions and issues in banking are often complex and therefore require a structured approach in order to facilitate the understanding thereof. To apprehend the challenging and complex theory behind modern times banking, it is imperative to tackle the models in an independent but assisted way. Only by working through the models themselves, students are able to gain a deep understanding of the complexity of the banking industry. As this poses a challenge, several lines of assistance are in place. The group work is intended to provide a first line of assistance. This way students can help each other. As a second line of assistance, there are tutorials in which students can discuss their solutions with a tutor. The continuous assessment over the course (there is an assignment every other week) is a device to ensure that students are on top of the course’s material at any point of the course. This is imperative for a course which contains a considerable amount of theory. It not only provides students with a deeper understanding of the material but also makes the learning experience more enjoyable.
(2) 60% Closed book exam (2 hours).
The exam will be similar in format to the assignments. It will be a cross section of themes covered in the assignments (ILO1-4). The purpose of the exam is solely to evaluate the individual student’s performance which is difficult to ascertain from group assignments. As apparent from the relatively low weighting, the main learning experience in this unit will be achieved via the assignments.
Formative assessment
The formative assessment is integrated with the summative assessment. While working on the assignments students are in permanent exchange with each other and with the teachers. Due to the five assignments over the course of the unit, students receive continuous feedback on their understanding of the material and their aptitude to critically assess institutions in banking.
The course is based on two textbooks: 1) “Introduction to Banking” (2015) by Casu, Girardone and Molyneux. Pearson. and 2) “Microeconomics of Banking” (2008) by Freixas and Rochet. MIT Press
