Banking and Financial Intermediation

  • 16-weeks
  • 3 credits
  • Prerequisite: F303 and F305 with grades of C- or better

The main topics are (1) the economic role of financial intermediaries, with an emphasis on commercial banks; (2) the evolution of markets in which banks and other financial intermediaries operate; and (3) the regulation of commercial banks and other financial institutions.

Learning Objectives:
I. The role of intermediation    
   A. Asset transformation and brokerage    
   B. Intermediaries as solutions to agency and informational problems in credit markets    
   C. Disintermediation    
   D. Firms' choice of financing source 
II. Lending    
   A. Credit Analysis    
   B. The Design of Loan Contracts
III. Off-Balance Sheet Lending    
   A. Loan Commitments    
   B. Standby Letters of Credit and Loan Sales    
   C. Asset backed securities
IV. Managing Interest Rate Risk    
   A. Duration and Immunization    
   B. Gap Management    
   C. Forwards, Futures, Swaps
V. Regulation and Regulatory Reform    
   A. Deposit Insurance and Capital Regulation    
   B. Lessons of the S&L crisis    
   C. "Bank dominated" versus "Market dominated" financial systems  

Typical Text:  The Management of Financial Institutions: A Modern Approach, A. Saunders

Kelley School of Business

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