Lahore University of Management Sciences FINN 341A Financial Institutions and Markets Fall Semester 2017

Transcription

1 FINN 341A Financial Institutions and Markets Fall Semester 2017 Instructor Muhammad Basharullah Room No. 315 SDSB Building Office Hours Monday to Thursday Hours 2:30 5:30 pm Telephone Ext: 8080 and Secretary/TA Muhammad Rahman TA Office Hours Muhammad Azhar Imtiaz @lums.edu.pk; Muhammad Usman Course URL (if any) COURSE BASICS Credit Hours 3 Lecture(s) Nbr of Lec(s) Per Week Twice weekly Duration 90 Minutes Recitation/Lab (per week) Nbr of Lec(s) Per Week Once/every 2 weeks Duration 90 Minutes Tutorial (per week) Nbr of Lec(s) Per Week Once/every 2 weeks Duration 90 Minutes COURSE DISTRIBUTION Core Elective Open for Student Category Close for Student Category Yes All priority to seniors and juniors. Select sophomore may also apply. Freshman COURSE DESCRIPTION The course is designed to equip students with knowledge of a financial system, its regulatory framework and environments in, and as in other global economies. The course envisages a detailed discussion on Financial Markets. The money markets, capital markets of. The International Stock markets and global bond markets shall be discussed and compared with markets in. The course will also cover Foreign Exchange, Derivatives and commodities markets internationally and in. The course shall cover the Institutional framework within. Various banking and non banking institutions shall be discussed. A comparative analysis of their functions, roles and impact on economic system shall be critically examined. Besides revisiting the existing market oriented financial system and its fault lines, the alternate financial systems or paradigms shall be explored and covered in the course. The course is intended also to identify the regulatory compliance initiatives to ethical and prudential issues. COURSE CONDUCT: Primarily Lecture method based on assigned readings. Class discussions and presentations on assigned topics, various course relevant reports, articles and news on current developments affecting Financial Markets and Institutions Services of outside specialist speakers shall be arranged as well. Course pack shall be made available through photocopier COURSE PREREQUISITE(S)/CONDUCT FINN 100 Principles of Finance AND MECO/ECON 111 Principles of Microeconomics AND MECO/ECON 121 Principles of Macroeconomics 1

2 COURSE LEARNING OUTCOME (CLO) On completion of the course the students shall be able to 1. Understand the various function, activities, issues and roles of different financial markets and examine its nuts and bolts and the fault lines. 2. Understand the nature of different financial instruments, the rationale for structure, profile and the cash flow implications for sound financial decisions. 3. Know the regulatory framework within ; understand the challenges posed by Global Regulatory Architecture shaping up, and its implications for the global financial environments. 4. Critically evaluate the strength and weaknesses of some of the regulations. 5. Identify ethical issues and how they are addressed to improve the overall conduct of financial institutions and markets 6. Demonstrate effective writing and oral communication skills. Students shall be working a group environment and shall write and present the report according to the standard report writing and presenting methods. able to apply effective, written and verbal communication skills 7. Manage their group dynamics and team work. 8. Interpret the financial press releases and various financial situation analyses. 9. Engage in financial discourse on financial institutions and markets. They shall be able to critically examine the salient features of financial systems and its institutional framework. 10..Show a holistic understanding of systemic challenges and risks in the global financial environments. UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES General Learning Goals & Objectives Goal 1 Effective Written and Oral Communication Objective: Students will demonstrate effective writing and oral communication skills. Students shall working a group environment and shall write and present the report according to the standard report writing and presenting methods. The students shall besides group dynamics, learn effective, written and verbal communication. Goal 2 Ethical Understanding and Reasoning Objective: Students will demonstrate that they are able to identify and address ethical issues in an organizational context. Goal 3 Analytical Thinking and Problem Solving Skills Objective: Students will demonstrate that they are able to identify key problems and generate viable solutions. Goal 4 Application of Information Technology Objective: Students will demonstrate that they are able to use current technologies in business and management context. Goal 5 Teamwork in Diverse and Multicultural Environments Objective: Students will demonstrate that they are able to work effectively in diverse environments. Goal 6 Understanding Organizational Ecosystems Objective: Students will demonstrate that they have an understanding of Economic, Political, Regulatory, Legal, Technological, and Social environment of organizations. Major Specific Learning Goals & Objectives Goal 7 (a) Discipline Specific Knowledge and Understanding Objective: Students will demonstrate knowledge of key business disciplines and how they interact including application to real world situations (Including subject knowledge). Goal 7 (b) Understanding the science behind the decision making process (for MGS Majors) Objective: Students will demonstrate ability to analyze a business problem, design and apply appropriate decision support tools, interpret results and make meaningful recommendations to support the decisionmaker 2

3 Indicate below how the course learning objectives specifically relate to any program learning goals and objectives. PROGRAM LEARNING GOALS AND COURSE LEARNING OBJECTIVES COURSE ASSESSMENT ITEM OBJECTIVES Goal 1 Effective Written and Oral Communication CLO # 6 Final Project Report, Article Presentation and Class Participation. Goal 2 Ethical Understanding and Reasoning CLO # 3,4,5 Class Participations, Quizzes and Final Examination. Goal 3 Analytical Thinking and Problem Solving Skills CLO # 1,2,3,4,5,6 Final Project Report, Article Presentations and class participation Goal 4 Application of Information Technology CLO # 6,7 Final Project Report and Article Presentation Goal 5 Teamwork in Diverse and Multicultural Environments CLO # 6,7 Final Project Report and Article Presentation Goal 6 Understanding Organizational Ecosystems CLO # 1,2,3,4,5,,8,9,10 Final Exam, Quizzes and Class Participation Goal 7 (a) Program Specific Knowledge and Understanding CLO # 5,6,7,8,9,10 Final Examinations, Quizzes, Final Project Report and Article Presentations, Goal 7 (b) Understanding the science behind the decision making process N/A N/A GRADING BREAKUP AND POLICY GUIDELINES POLICY REGARDING EXAMINAIONS QUIZZES AND OTHER GRADING INSTRUMENTS. There is a zero tolerance policy (ZTP) for any undesirable behavior or undeserving attempt to improve grades during the quizzes and examinations. Such action can result in cancellation of examination paper. It may also result in disciplinary actions by Disciplinary Committee. Students are strongly advised to please carefully weigh in their action s costs and benefits. All students are also advised to show an ethical and moral deportment and behavior at all times. Class Participation (CP) 10 % To get full 10 marks, a student shall participate in at least 10 sessions. Missing final presentation sessions shall cost 2 marks per session, from marks earned till 25th sessions. Students shall not be allowed to enter the class room after 10 minutes. Doors shall be closed after that Policy regarding class participation The course is intended to be an interactive one. All the students are expected to participate in the class discussions. In order to ensure a positive learning climate, only intelligent and contributory observation and discussions shall be rewarded All ethical norms shall be observed in the class and examinations. Any attempt to disturb a classmate, engage in talking or whispering during the class or to vitiate the overall class atmosphere shall result in negative CP points Put your cellphone on Silent mode all time during the class time. On line chatting or use of technology related gadgetry of any kind may result in negative marks in class participation. However, use of internet on smartphone, may be used to seek current financial information with the permission of the instructor. Quizzes 20 % There shall be total of 4 unannounced quizzes and 2 announced from the assigned, discussed in class material and the last reading, Best 5 will be counted. No Makeup quizzes shall be allowed whatsoever. repeat whatsoever 3

4 Group Projects and Assignments ( Reports & Presentation) 35 % Group projects ( Group size of 4 5 persons, depending on class size) Each group shall select a Financial Institution or Markets or a topic of interest for the detailed analysis. Group members shall be asked to remain abreast with the developments taking place in the marketplace, through financial press. The impact of current developments taking place, which are pertinent to their selection of study, shall be monitored and compiled by the group. The groups shall be finalized in the 4th sessions. The group is expected to apprise the class with their observations through class participation. Project 1 Article ( 10 Marks) A report on comprehensive and critical analysis of a selected article on Financial Institution, Financial Markets or o a related topic shall be prepared and presented by each group. At least 3 articles should be presented for approval by 7th session. The articles report must be presented by 11th session. The written analysis shall not exceed 10 pages 1½ space 12 Times New Roman excluding title index and bibliography etc. late submission will be penalized. Project 2 ( 15 Marks) A report on comprehensive and critical analysis of a selected Financial Institution or Financial Market or a related topic shall be prepared and presented by each group. The outline of the report shall be presented by 21th session for approval. The report must be submitted and presented by 25th session. The report shall not exceed 15 pages 1½ space 12 Times New Roman excluding title index and bibliography etc. late submission shall be penalized. Assignments ( 10 Marks) 4 individual assignments. All assignments shall be given when required. All assignments to be completed by 20th session. FINAL EXAMINATION DETAIL FINAL COMPREHENSIVE EXAMINATION 35% The examination could be mix of MCQ short exercise and short explanations. Students may also expect a question or two from the assigned report or a case or a situation analysis. There is a zero tolerance for any undesirable behavior to undeserving attempt to improve your grades during the quizzes and examinations EXAMINATION DETAIL Midterm Exam NO Final Exam Yes: Combined Duration: 120 minutes Exam Specifications: only calculator is allowed, closed book, closed notes COURSE OVERVIEW WEEK/ LECTURE/ MODULE Day 1 Introduction TOPICS PART 1 INTRODUCTION AND OVERVIEW OF FINANCIAL INSTITUTIONS CHAPTER 1, 2, & 4 RECOMMENDED READINGS Introduction to the course requirements Why Study Financial Markets and Institution; OBJECTIVES/ APPLICATION To Introduce and acquaint the subject matter to be covered in 4

5 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7, WEEK/ LECTURE/ MODULE Day8,9 An Overview of Financial System Financial Markets and Institutions State Bank Of and Regulation of Commercial Banks Commercial Banks Commercial Banks. (Continues) Commercial Banks and Financial Statement Analysis TOPICS Other Institutions regulated by State bank of ; The ancillary associations and bodies Lahore University of Management Sciences An over view of the Economic System. Role of Savings and Investments. Overview of Comparative Financial Systems; An Overview of Islamic Financial System, Environments and Regulatory Framework A Timeline and a brief history of Financial Institutions in PART 2: FINANCIAL INSTITUTIONS COMMERCIAL BANKS AND REGULATIONS CHAPTER 11, 12 AND 13 Regulatory environments of commercial banks in ; Role of a Central Bank; Money supply & interest rates; monetary policy tools; other issues related to monetary policy;; Prudential regulations. Definition of a Commercial Bank; Balance sheet and recent trends; Commercial Banking as a sector of Financial service Industry; Structure and composition of Industry in Technology in commercial Banking; Regulations; Recent developments and its futures; Branchless, Mobile Banking, Payment Systems; PRISM NIFT, CHIPS, Swift etc. Islamic Banking initiatives in : Micro finance Banking. Financial Statement Analysis of commercial Banks in ; Return on Equity and its components. SBP suggested ROE decomposition. Some Important Global Regulatory issues SIFI,s; Financial Stability Board; The Uniform Financial Institutions Rating System (UFRIS); What is CAMEL? Basel Accords; QUIZ 1 Announced PART 3 OTHER FINANCIAL INSTITUTIONS CHAPTER 14, 15, 16, 17& 18 RECOMMENDED READINGS Islamic Banking Islamic Modes of Financing in, Leasing Association of ; Exchange companies. Development Financial Institutions, Role of DFIs in, HBFC Micro finance Banking the course. To Introduce and acquaint the subject matter to be covered in the course. ( continues ) An introduction of different types of Institutions. With reference to. Regulatory architecture in place, A review of historic regulatory land marks and recent developments. To introduce framework Financial Statement analysis of banking in. banking council ; banking association Role of technology in Commercial Banks. Islamic banking overview. And the scope and developments. To understand the framework of financial Analysis of Commercial Banking OBJECTIVES/ APPLICATION To apprise with working of other banking related institutions 5

6 Day 10 Day 11 Day 12 Day 13 Day 14 Day15 Day 16 Lahore University of Management Sciences Assignment Islamic Modes of Financing in, Due on 11 th session Thrifts, Saving Institutions, Credit Unions, Other Lending Institutions Finance Companies; Cooperative Credit societies. To have basic understanding of Saving Institution in in, Postal Saving Banks thrift institutions National Directorate of Savings Assignment National Directorate of Savings Due on 14 th session Non Bank Financial Institutions Role of SECP in regulating Non Bank FI s; Insurance Companies Security Firms and Investments Banks. Modarabas, & Leasing Mutual Funds Mutual Funds Continues and Hedge Funds Different areas of regulations. The categories of insurance companies. Life Insurance companies, Balance sheet trends. Property and causality insurance. Global Issues. Insurance in Takaful the Islamic Insurance. Services Offered by Securities Firm and Investment Banks. Main Activities, Investment banking, Trading, Investing M& A, Private Equity, Venture Capital, Wealth Management and other services. An overview of Mutual funds. Closed End Funds and Open End Mutual Funds Different Types of Mutual Funds, ETF s and Ultras Mutual Funds return and Costs. Mutual Funds balance sheet and recent trends. Types of Hedge Funds, Offshore Hedge Funds. Regulatory challenges for hedge funds. To understand the scope of regulation on non bank financial institutions To understand the role and place of insurance industry in a financial system. To critically examine the challenges of Insurance Industry in. To understand the issues related to Investment banking To get acquainted with different types of Mutual Funds and investment companies To understand the phenomenon of Hedge funds. How they emerged and the regulatory challenges it poses. Assignment Mutual Funds Association of. Due on 18 th Session Pension Funds.defined benefits vs. Defined Pension Funds and contribution pension funds; Private and Public State of Pension Funds and its Pension Funds. A brief overview of Pension developments. Funds in. PART4 SECURITIES MARKETS CHAPTERS 5, 6,7,8,9 &10 Day 17 Day 18,19 Money & Capital Markets Fixed Income Securities Capital Markets Bond Markets An overview of Money and Capital Market and Instruments; Brief Explanation of some of the Money Market Instruments. International Bond Market; Bond Valuation and simple Illustration of Concept of Duration and its use in financial markets and institutions Money Market and Bond market in Mortgage Markets To be able to understand the dynamics of Money and capital markets Some issues related to bond markets and its recent developments 6

7 Day 20,21 Day 22, Lahore University of Management Sciences Assignment Term Structure of interest rates; Duration Due on 21 th Session To understand the dynamics of Capital Markets Stock Markets around the world. Stock markets and essentials of (Stock Markets) An Overview of the stock markets around the stock exchanges world and in. Some issues pertaining to Stock Market in. Role CDC and NCCLP and Issues such as Margin Financing. CFS, Badla Other Financial Markets: FOREX Market Other Markets (Foreign Exchange Markets, Commodity Markets & Derivative Securities Markets). An Overview of Forex market and Interest rates, International quotations conventions; Foreign exchange rates and transactions. To understand the forex markets from an International FOREX conventions. Day 23,24 Day25 Day26 Other Financial Markets: Derivative Securities Markets Types of Risks faced Financial Institutions Securitization An overview of Derivative Securities Markets. Spot, Forwards, Futures, FRAs and Swaps. Options; Calls, Puts, Caps; Floors and Collars etc. Exotics and Some new arrivals on derivative markets Risk management with swaps; Interest rate swaps, currency swaps and credit swaps. Interest rate Risk Management with Caps, Floors and Collars. Authorized Derivative Traders and Non Market makers Financial Institutions PART 5 RISK MANAGEMENT IN FINANCIAL INSTITUTIONS CHAPTER19,&24 Why Financial Institutions need to manage a risk; A brief discussion on different types of risks. An overview of the derivative products and Markets. An introductory discussion on risk management with derivatives Understand various type of risks. Final Presentations Day 27, Presentation (Group 1 to 4) Day 28 Presentation (Group 5 to 8) TEXTBOOK(S)/SUPPLEMENTARY READINGS Required Text Financial Markets and Institutions. By Anthony Saunders & Marcia Millon Cornett 6th edition Recommended Additional Readings, Books and Other Material 7

8 (3)Efficiencies and Inefficiencies in capital Markets of. (3)Role of SBP and SECP as Regulatory agencies in. Financial Conduct and Prudential Authority in UK and is it efficient? (1)Shape of Emerging Financial System Fixed Income Securities Market in Yield curve of debt market. Lahore University of Management Sciences ON THE SIDE AGENDA HERE ARE SOME OF THE REPORTS WRITTEN BY THE STUDENTS IN THE PAST SOME OF THE SUGGESTED TOPICS (1) European debt crises and its fallout on Financial Markets PIIGS (2)Regulatory challenges being faced and efforts to find a global regulatory Architecture (2)Demutualization of stock Markets and merits and demerits(2) (2)Islamic Banking in Islamic Insurance(Takuful) (Islamic Bonds, Sakuks (2)Foreign Exchange Market in FDI, Flight of capital and Money Laundering And Hawala System Its impact on economy of (3)Micro credit in, Successes and Failures. Indian experience. (3)Insurance industry in (3)Rating in (PACRA & JCR VIS) International rating of i Banking Sector (1) (3)Trends in commercial Banking; Consolidation and mergers in Banking Sectors in Privatization of Banking sector (3)Mutual Funds Industry in (2)Risk Management Process, and Risk Management in. (SBP Initiative) Derivative Markets in (2)Foreign Exchange Crises. Rise and Fall of Dollar and the Euro (3)Forensic Reports on Stock Market /CFS, Badla and Margin Financing, Insiders trading Rules and controlling it. (3)Pension Funds and Employees Welfare Funds in, EBOI (1)Interest Rates. Is Zero or near zero interest rates are here to stay (3) Central Depository Scope of a other Custodian Banking (3)Role of Custodian Banking CDC Leasing Scenario in. (3)CPEC Financial impact on Financial Institutions of. China is coming or has arrived in (1)Wall Street movement. What is it and when it sizzles and fizzles (2)Emerging and Frontier Markets Classifications. (2)Debt Market in Europe (3) Role and Scope of SMEADA (SME Banking Specialized Financial Institution (3)Cooperative banking experience in (2)Capital Market Union. (3)Associations of non Banking Financial sector, Housing Finance by HBFC and commercial Banks in, Scope of REITS (3)Syndication in The State and scope of Consumer Financing in Any other topics proposed by a students and approved by the instructor (2)Stock markets in China (3)Central Bank (2)HFT and its impact (3)European Central Bank (3)Presentation on Modarabas; (2)Stock markets in China (2)Stock markets in North America (3)Trend in use of modern technology in NIFT, CHIPS, Swift and other payment systems (1)Islamic Finance 2)TFC s &Islamic Bonds (Sakuks (3)Postal Saving and insurance in Japan and in (2)Stock markets in Europe (3)Role of Financial Stability Board (3)International Organization of Securities Commissions (3)MSCI Classification of International Stock Markets 8

9 A brief study of Stock Market in ; Inefficiencies in Stock Market Bonds Market in ; Foreign Exchange and Scope of Derivative Markets in Islamic Banking in Saving Institutions Cooperative banking experience in Analytical framework of FIM Statement Analysis of financial sectors in KPMG SMEDA and Microfinance. Derivative Markets in Presentation on Securitization in Recent Developments and Role of Investment Banking in. Pension Funds and Employees Welfare Fund SECP regulation on Insurance Risk Management in Islamic Modes of Financing Regulatory Framework Islamic Insurance (Takuful) Presentation on Diminishing Musharika. 9