AØKA08069U  The Economics of Banking

Volume 2013/2014
Education
MSc in Economics
Content
The course covers two aspects of the topic, microeconomics of banking and risk management. In the microeconomics part, teaching starts with discussing key competences of banks, proceeds to fundamental aspects of banking such as the loan contract and credit rationing, discusses liquidity problems and bank runs, and ends up with a treatment of bank regulation involving the roles of central banks, deposit insurance and financial supervision authorities. In the risk management part, the course covers the basics of risk management in banks, measurement of risk, and then discusses the different types of risk occurring in banking, namely liquidity risk, interest rate risk, market risk, credit risk, and operational risk. For each of the risk types, the course covers the measurement of risk as well as methods for reducing risk.
Learning Outcome

The course aims at giving the students the abilities and competences needed to understand and to deal with main problems in the banking sector, both with respect to the functioning of the sector as a whole and the single bank. More specifically, the students are expected after the course to have the following competences:

  1. Knowing and assessing the roles of banks in the financial sector, related to the basic problems of asymmetric information in its different forms,
  2. Knowledge of contract forms and the conditions for choosing a given contract depending on the underlying economic conditions,
  3. Understanding the background of problems related to difficulties in obtaining credits and how they can be remedied,
  4. Knowing about the interrelation between competition in the banking sector and interest rate levels,
  5. Understanding the causes of bank runs and bank panics, knowledge of different institutional setups designed for coping with bank runs,
  6. Knowledge of basic principles for deposit rate insurance, understanding of the intrinsic problems related to assisting troubled banks, as well as the distribution of competence among different authorities
  7. Knowledge of basic principles of risk management and of risk measures, as well as the basic organisation of risk management in a bank,
  8. Knowledge of different types of risk and the way in which these risks are measured and mitigated.
We use lecture notes which can be downloaded from: www.econ.ku.dk/​keiding/​textbooks/​EconomicsOfBanking
3 hours of lectures per week for 14 weeks
Credit
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
A 3 hours written examination taking place at Peter Bangs Vej 36.
Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period
Will be updated before the start of the semester
Re-exam
Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment
The Student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.
  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 161
  • Exam
  • 3
  • Total
  • 206