Fall II 2025: Course Description and Overview
Financial institutions (FIs) help channel savings to investments. Intermediaries such as banks take funds from depositors and make loans to borrowers. Other intermediaries act as brokers, channeling investor funds directly to end-users or make loans funded by non-deposit funding. Our course studies all types of intermediaries but mainly focusing on banks from a risk management perspective. We study the nature of the risks that banks face, how risks are measured, how they are managed, and how (and why) banks are regulated and supervised. This course is fast paced. It involves some math but not at a particularly difficult level. The cases focuses on case studies and a simulation tool, BankExec that lets groups of students run a bank in competition against other banks.
Prerequisite(s) BU.231.620 or BU.910.611
Learning Objectives By the end of this course, students will gain and understanding of the structure, functioning, risks, risk management and the regulatory architecture of the U.S. banking system as well as emerging trends, threats, and practices in modern banks. Specifically:
- Understand the functions of US FIs and how they have changed over time.
- Understand the sources of risks for FI, how to quantify them, and the instruments used to manage them. Interest rate, credit, and liquidity risks are our focus but we will discuss others such as operational or counterparty risks.
- Understand the bank regulatory environment: institutions, objectives, and practices. The key issues here will be (a) capital adequacy and bank capital management; and (b) liquidity risks and their management, a topic that covers the unique role of bank runs in regulation.
- Understand how FinTech is altering the landscape of (1)-(3).
- In a team setting, manage a financial institution in a simulated competitive marketplace.