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Module Title: Financial Institutions Risk Management

Module Director: Professor Ted Gardener

Available Routes:

Core Module - Full and Super Accelerated Routes

Module Overview:

This module explores the risk management function in modern, shareholder owned banks. A fundamental approach adopted is that financial institutions risk management is a central element of practical bank financial management. In this context risk management is seen practically as linking risk-taking (an essential economic role of banking firms) and financial management (managing these risks and the respective risk and return tradeoffs in the most efficient way). The nature, strategic context and management of bank risks are examined.

Module Aims & Objectives

On completing this module students will:

  • Understand the role of risk management
  • Be able to undertake a risk management role in their institution
  • Understand the theories underpinning risk management
  • Understand the regulations relating to risk management within the banking and financial services sector
  • Understand their responsibilities under the regulations and how to meet them

Key Text:

Financial Institutions Management: A Risk Approach 7th Edition Anthony Saunders & Marcia MillonCornett—McGraw Hill

Means of Assessment:

This module is assessed by means of an individual assignment (40%) and examination (60%)

Unit One covers:

An introduction to FIRM and explains the main themes that run throughout the module. The structure of the module is outlined and the main text introduced. An overview is provided of banking and its role in the modern financial services industry. The nature of bank competition, regulation and their impact on FIRM are explored. Finally, the imperative on efficiency and marked-based valuation are explored as fundamental themes in modern FIRM.

Unit Two aims:

  • To examine a bank’s main financial statements and their relationship to the risks inherent in banking;
  • To understand how a bank’s performance can be evaluated;
  • To understand the &banking significance of bank Asset and Liability Management and risk management;
  • To analyse the nature and BFM significance of interest rate risk and liquidity risk to BFM;
  • To examine the off-balance-sheet activities carried out by banks and to appreciate their BFM significance.
  • To consider the impact of the crisis (the ‘credit crunch’) on these areas
  • To appreciate the impact of the credit crunch on the banking risks covered in this unit and, especially, on capital adequacy management and regulation.
  • To understand the nature and key importance of bank corporate governance.

Unit Three aims:

  • To examine the nature and role of product and geographic diversification within a bank’s risk management;
  • To examine and understand how banks use derivative contracts to hedge their asset-liability risk exposures;
  • To analyse how loan sales and securitisation techniques are used by bank managers to control credit risk.
  • To consider some further changes to the banking risk landscape in the wake of the credit crunch.

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