Banking and Financial Markets: A Risk Management Perspective

By P C Narayan | Indian Institute of Management Bangalore (IIMB)

Learners enrolled: 7309

Banking and financial markets encompass the ‘ecosystem’ that (a) channelizes money from those who have it (i.e. savers/investors) to those who need it (i.e. borrowers) and (b) facilitates cross-border flow of funds through exchange of currencies. That ecosystem of banks and financial markets (including Central Banks) has deepened in size, sophistication and complexity over the years. However, in recent times they have also been the subject of abuse, failures and economic distress in several countries resulting in a ‘contagion’ that has concurrently affected several countries around the world!

More recently, and perhaps more importantly, thanks to the liberalization of most economies, the world has witnessed an exponential increase in the free flow of capital across countries. Banking institutions and financial markets, being the predominant conduit for such free flow of capital across countries, have therefore become even more "globally interconnected." Such a globally interconnected financial system, combined with regulatory systems that are country-specific and hence varying considerably in rigor and implementation, has further compounded the risks and the consequent contagion, as witnessed in the global financial meltdown that was triggered in 2008.

This course will look at banking and financial markets from a risk management perspective where you will learn about:

How to measure and manage credit risk, interest rate risk, foreign exchange risk, operational risk, off-balance sheet risk, etc. in any financial system.
How these risks have become ‘omnipresent’ and significantly more complex as a result of globalization and interconnectedness of banking and financial markets across countries.
Liquidity and solvency issues in financial institutions and markets and how they could be managed.
The structure of asset securitization and credit derivatives and their role in managing (sometimes augmenting) risks in any financial system.
How to measure, quantify and analyze the level and degree of financial risk over a stipulated time frame using different tools and techniques such as Value at Risk (VaR), Stress Test, etc.
The role of regulation and monetary policy to: (a) ensure the stability and longevity of any financial system and (b) minimize the impact of possible adverse outcomes and contagion effects implicit in any financial crisis, particularly when the financial systems are globally interconnected.

Prerequisites:
Basic understanding of statistics and mathematics concepts is recommended. Knowledge of basic finance and banking concepts would be an advantage. Alternatively, learners should have completed the course titled 'Introduction to Banking and Financial Markets - I'.

Summary

Course Status :	Completed
Course Type :	Core
Duration :	6 weeks
Category :	Management Studies
Credit Points :	2
Level :	Postgraduate
Start Date :	31 Jan 2020
End Date :	30 Apr 2020
Enrollment Ends :	08 Mar 2020
Exam Date :	09 May 2020 IST

Note: This exam date is subjected to change based on seat availability. You can check final exam date on your hall ticket.

Page Visits

Course layout

Week 1: Overview of Risk Management

Overview of Risk Management in Banking and Financial Markets
Liquidity & Solvency Risk
Overview of Liquidity and Solvency
Managing Liquidity (CRR and SLR)
Managing Solvency & Capital
Adequacy (BASEL- I)
Liquidity Risk Management
Operational Risk: Measuring and Managing Operational Risk

Week 2: Credit Risk

Retail Lending
Lending to SMEs
Measuring and Managing Credit Risk
Monitoring Credit Risk
Credit Risk Assessment Models
Loan Concentration Risk
Loan Portfolio Risk
Off-Balance Sheet Risk

Week 3: Interest Rate Risk

Overview of Interest Rate Risk
Yield Curve: An Overview
Measuring and Managing IRR: Repricing Model
Measuring and Managing IRR: Duration Gap Analysis
Interest Rate Derivatives
Interest Rate Futures
Interest Rate Swaps
Risk Measurement Matrices
VaR (Value at Risk)
Stress Test

Week 4: Foreign Exchange Risk

Recap of Foreign Exchange Risk Concepts and Terminology
Foreign Exchange Risk: Introduction
Managing Foreign Exchange Risk:
Transaction Exposure
Translation Exposure
Operating Exposure
Currency Futures
Currency Options

Week 5: Asset Securitization, CDO & CDS

Asset Securitization: An Overview
Basic Attributes, Cash Flows and Structuring
Payment Structure
Credit Rating and Credit Enhancements
Types of Securitization: Residential Mortgage Backed
Securities (RMBS)
Credit Card Securitization
Credit Enhancements using CDS
Collateralized Debt Obligations

Week 6: BASEL II, BASEL III and Regulation & Monetary Policy

Basel II Guidelines for Capital Adequacy
Basel III Guidelines
Regulation & Monetary Policy
Regulation and Monetary Policy for Banks
Need for Independence of Central Banks
2008 Financial Crisis

Instructor bio

P C Narayan

Indian Institute of Management Bangalore (IIMB)

P C Narayan is a faculty member in the Finance & Accounting Area at the Indian Institute of Management Bangalore (IIMB), where he has been teaching since 2003. His areas of research interest and expertise include risk management, banking and financial markets, international finance, regulation and monetary policy and technology related to banking and financial markets. His PhD thesis won the ‘Outstanding Doctoral Research Award’ of the European Foundation for Management Education and Emerald Publishing in 2013. He won the ‘Teaching Innovator Award-2016’ from the Ministry of Human Resources Development, Government of India for his innovative and effective use of technology in the graduate class-room. He was a member of the Advisory Group of the Unique Identification Authority of India (UIDAI) set up by the Government of India in 2009. He consults for and trains managers in several organizations in India and abroad in the banking, manufacturing and information technology sectors. Prior to joining IIMB, he was based overseas for several years with a multinational bank and subsequently as the President of a bank in India. Having spent many years in industry as well as in academia and having travelled to over 40 countries and having worked in 20 different countries, he brings a breadth of global experience and a unique cross-cultural perspective in his teaching and research.

Course certificate

Type of exam: Computer based exam

You will have to appear at the allotted exam centre and produce your Hall ticket and Government Photo Identification Card (Example: Driving License, Passport, PAN card, Voter ID, Aadhaar-ID with your Name, date of birth, photograph and signature) for verification and take the exam in person. You can find the final allotted exam centre details in the hall ticket.

The questions will be on the computer and the answers will have to be entered on the computer; type of questions may include multiple choice questions, fill in the blanks etc.

FINAL CERTIFICATE:

Weightage: 25% weigtage for weekly assignment + 75% weigtage for final exam.

Passing Marks: You will be eligible for certificate only if you score minimum 40% weekly assessment and min 40% in final exam. If you score less than 40% in either weekly assessments (avg) or in final exam, you will not receive the certificate.

The final score will determine if you will/will not receive a certificate.

1. Final score < 40%: NO certificate.

2. Final score between 40% -49.99%: Grade D.

3. Final score between 50% -59.99%: Grade C.

4. Final score between 60% -84.99%: Grade B

5. Final score of 85% and above: Grade A