Banking 2600-DSFRw2BANK
LECTURE:
1. Two-tier banking sector
• Two-tier banking system: central bank, commercial banks.
• Functions of central bank and structure of central bank's balance sheet.
• The mechanism of money supply - money creation multiplier.
• Monetary policy instruments of central bank - required reserves ratio on deposits, exchange rate policy, interest rate policy, policy of open market operations.
• The problem of central bank’s independence, NBP and its decision body: the Monetary Policy Council.
• Banking supervision: its evolution and contemporary design (the Polish Financial Supervision Authority).
• The European System of Central Banks (ESCB) and its bodies (ECB, NCB) as the central bank of the European Monetary Union.
2. Savings banks as compared to other financial intermediaries
• Universal banking versus specialised banking.
• Savings banks, specialised banks (mortgage, installment loans, building societies and credit unions).
3.Services and banking operations
• Classification of banking operations in the Banking Act: active, passive and intermediary operations.
• Methods of cashless bank transfers: credit order, direct debit, cheque, payment cards, collection of invoices, letters of credit.
• Interbank clearing systems - KIR, ELIXIR, SORBNET2, SWIFT, TARGET2.
4. Commercial savings bank as a company – elements of its financial statements
• The balance sheet structure of commercial savings bank.
• Profit and loss account in commercial banks - banking profit, operating profit, gross and net profits.
• Key indicators of banks’ financial soundness.
5. Bank lending activities
• Credit procedures in banks. Strategy of credit extension in banks.
• Stages of lending activity in banks.
• Methods of assessing creditworthiness of customers.
• Legal forms of loans’ collaterals (financial collateral, credit risk transfer tools, mortgage, etc).
• Classification of credit portfolio and reserves and provisions for nonperforming loans.
• Dealing with bad loans.
6.Risk in banking business
• Management of bank’s assets - loan portfolio and investment portfolio of banks. Management of bank's liabilities - sources and cost of capital raising.
• Role of bank's own capital in reduction of its risks.
• Risks in banking business.
• Methods used in assessment of bank's exposure to different types of risks (e.g. gap analysis).
7. Credit Risk
• Use of external ratings in credit risk assessment of individual customers.
• Internal ratings
• Portfolio risk - rule of risk diversification.
8. Foreign exchange risk
• Measure of bank's exposure to currency risk. Individual foreign exchange positions and the total foreign currency position.
9. Interest rate risk
• Definition of interest rate risk.
• Assets and liabilities sensitive to changes in interest rates: methods used in measurement of interest rate risk: the repricing gap model and the duration gap model.
• Principles of functioning of interbank money market.
• Methods of hedging of interest rate risk.
19. Liquidity risk
• Classification of bank assets and liabilities according to their maturity and due dates.
• Golden rule in banking.
• Principle of bank’s deposit sedimentation and principle of shifts in maturity dates of assets. Securitisation as a method of liquidising assets.
• Liquidity balance sheet of banks. Bank's balance sheet items due to their maturity.
11. Insolvency risk and bank regulations
● Micro and macroprudential regulation;
● Regulations of the assessment of lending portfolio quality and measurement of loan-loss provisions (specific, general, dynamic provisions, etc.);
● Liquidity regulations;
● Deposit insurance protection schemes and financial safety net;
● Capital adequacy regulations (Basel Committee standards); Pillars of capital adequacy measurement; bank capital ratios (CET, Tier 1, total); captal reqirements; capital buffers;
● Macroprudential policy and its instruments.
LABORATORIES:
1 Central banking and transformation of financial intermediation
Two-tier banking system, central banks, banking systems in selected countries – Poland, European Monetary Union, USA, Great Britain (NBP, ECB, FED, Bank of England), functions, objectives, policy instruments, independence and organisational structure of central banks, foreign exchange reserves, seigniorage, analysis of balance sheet and profit and loss account of central bank, Eurozone – convergence criteria, euro – single euro currency, monetary policy (expansionary and contractionary policy), tendencies on the market of financial intermediation: technical progress, globalisation, platformisation of services, e- and m-banking, FinTech, GAFAA, liberalisation and deregulation versus reregulation, open banking, new banking products
2 Commercial banking and payment system
Types of banks according to Polish Law, universal and specialised banks, banking operations, non-cash payment methods and payment instruments – credit transfer, direct debit, plastic and virtual payment cards (credit, debit, charge and prepaid), mobile payments, documentary collection, letter of credit; clearing and settlement, interbank clearing and settlement systems – KIR, ELIXIR, SORBNET2, SWIFT, TARGET2, Nostro and Loro accounts
3 Bank operations and reporting, bank performance indicators
Loan extension process in banks, credit procedures, bank’s credit strategy, stages of bank’s credit activity, credit application, methods of measuring clients credibility (inter alia credit rating and credit scoring), ratios of and limits to credit portfolio concentration, legal forms of securing credits, classification of credit portfolio and loan loss reserves and provisions for non-performing loans, supervisory prudential regulations, international accounting standards in the accounting of bank groups – IASs/IFRSs, examination and evaluation of bank’s financial soundness (analysis of balance sheet and profit and loss account of commercial bank, efficiency ratios, Du Pont analysis).
4 Risk in banking and banking regulations
Risk types: credit, market, interest rate, liquidity, country and transfer, reputation, operational, law, methods of risk measurement and hedging risk).
Micro and macroprudential regulation; Regulations of the assessment of lending portfolio quality and measurement of loan-loss provisions (specific, general, dynamic provisions, etc.); Liquidity regulations; Deposit insurance protection schemes and financial safety net; Capital adequacy regulations (Basel Committee standards); Pillars of capital adequacy measurement; bank capital ratios (CET, Tier 1, total); capital requirements; capital buffers; macroprudential policy and its instruments.
Type of course
Mode
Prerequisites (description)
Course coordinators
Learning outcomes
K_W01
K_W02
K_W03
K_W05
K_U01
K_U02
K_U03
K_U05
K_U06
K_K01
K_K03
THE STUDENT:
K_W01 Knows and understands research methodology and terminology in the discipline of Economics and Finance and in complementary disciplines (Management and Quality Sciences, Legal Sciences), in particular financial management and accounting.
K_W02 Knows and understands at an advanced level the principles, procedures and practices relating to the financial activities of various types of organizations and uses the theory of Economics and Finance and complementary disciplines (Management and Quality Sciences, Legal Sciences) to recognize, diagnose and solve problems related to financial management in organizations, accounting, management of financial institutions and strategies of financial institutions.
K_W03 Knows and understands at an advanced level economic theories and models regarding the functioning of organizations and the entire economy.
K_W05 Knows and understands technological, social, political, legal, economic and ecological processes and phenomena and their impact on financial decisions in organizations, the functioning of the organization and the entire economy, including the principles of protection of industrial property and copyright.
K_U01 Is able to use the theory of the discipline of Economics and Finance and complementary disciplines (Management and Quality Sciences, Legal Sciences) to recognize, diagnose and solve problems related to financial decisions in organizations and management of financial institutions, using the appropriate selection of sources and adapting existing methods.
K_U02 Is able to correctly interpret technological, social, political, legal, economic and ecological processes and phenomena and their impact on financial decisions in organizations, the functioning of the organization and the entire economy, using the appropriate selection of sources.
K_U03 Is able to independently and collectively prepare analyses, diagnoses and reports on financial management in organizations, accounting, management of financial institutions and strategies of financial institutions and present them communicatively, also in English - using IT and communication tools.
K_U05 is able to plan and organize own and team work
K_U06 Has the ability to self-educate and improve acquired qualifications.
K_K01 Is ready to assess and critically approach situations and phenomena related to financial management in organizations, accounting, management of financial institutions and strategists of financial institutions.
K_K03 Is ready to comply with professional ethical standards.
Assessment criteria
LECTURE:
The course grade is based on the exam result. Written exam in the classroom - stationary or using the e-learning platform. People who have passed the exercises can take the exam
Below are the estimated percentage thresholds that determine the grade:
Below 50% – grade 2
50-65% – grade 3
66-75% – grade 3.5
76-85% – grade 4
86-95% – grade 4.5
96-100% – grade 5
EXERCISES:
The final grade depends on students' involvement in class work and the result of the final test. Continuous assessment (class work, written assignments/team and individual assignments). Written test in the classroom (at the instructor's discretion, the eNauka portal may be used)
Practical placement
None, optional
Bibliography
BASIC:
Górski M., 2018, Rynkowy system finansowy, Warszawa: PWE
Iwanicz-Drozdowska, M., Jaworski W.L., Szelągowska A, Zawadzka Z.,2022, Bankowość – instytucje, operacje, zarządzanie. Poltex Warszawa
SUPPLEMENTARY:
Resti A., Sironi A., 2007, Risk management and shareholders value in banking, Wiley & Sons (accessible online)
Moorad Choudhry, 2014, An Introduction to Banking: Principles, Strategy and Risk Management (accessible online)
Other materials recommended by teachers during classes
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: