Handbook : Unit informationEdith Cowan University

Faculty of Business and Law

School: Business

This unit information may be updated and amended immediately prior to semester. To ensure you have the correct outline, please check it again at the beginning of semester.

• Unit Title

  Risk Management in Banking

• Unit Code

  ECF6125

• Year

  2015

• Enrolment Period

  1

• Version

  2

• Credit Points

  20

• Full Year Unit

  N

• Mode of Delivery

  On Campus
  

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Description

Students will develop the skills to effectively manage the risk-return tradeoff inherent in a large financial institution, such as a bank. While there are a number of financial risks which need to be considered in managing a bank, students will focus on capital risk, interest rate risk, credit risk and liquidity risk. Students will also gain an appreciation of the impact that international and national prudential regulations have on this risk-return tradeoff; particularly in terms of the role of the Bank of International Settlements (BIS) and the Australian Prudential Regulation Authority (APRA). The second objective is for students to develop and apply independent research skills applicable to risk management in financial institutions. Thus, this unit incorporates the planning and execution of a substantial research based project relating to key risks of banks.

Learning Outcomes

On completion of this unit students should be able to:

1. Analyse the detailed financial statements (including notes) for a bank.
2. Apply those principles to the financial statements of financial institutions generally and, in particular, the major financial institutions operating in Australia.
3. Assess the impact that the various risks have on the profitability and operations of a financial institution.
4. Compare and contrast financial institutions in terms of their different approaches to managing the risk-return tradeoff.
5. Evaluate the impact that the current prudential regulations have on the risk-return tradeoff for Australian and international financial institutions.
6. Make recommendations about how to effectively manage the risks and improve the risk-return tradeoff.
7. Plan and execute a substantial research based project.
8. Synthesize the principles involved in the risk-return tradeoff for capital, liquidity, credit and interest rate risk.

Unit Content

1. Capital risk.
2. Credit Risk.
3. Financial institutions and the process of financial intermediation.
4. Interest rate risk.
5. Liquidity risk.
6. Planning, researching executing and writing up a research based project relating to bank risk.
7. The role of prudential regulation in shaping the risk-return tradeoff, particularly as a result of the revised Basel regulations coming out of the Global Financial Crisis.
8. The special nature of the financial statements and operation of financial institutions.

Additional Learning Experience Information

Students attend a weekly three hour seminar. There are two forms of assessment in the unit: a presentation, and a major research project. The presentation develops communication and research skills through involving students in developing and presenting a research plan relating to financial institutions management. The presentation will be done in a team format. Building on the research plan, the two-part research paper involves an analysis and comparison of the risks of two Australian banks. This is a high level learning task which aims to develop a number of important abilities including: research skills through the execution of the research project; critical thinking skills through analysing the contents of the financial reports; the ability to read and understand complex general purpose financial statements for a listed company (including the notes); the ability to analyse the impact of international regulations on Australian banks both in their local and overseas operations; the ability to plan and structure a research document, including abstract, research question, introduction, methodology, findings and conclusions; the ability to present analysis in a high quality research format using EndNote referencing software and various advanced features in Microsoft Word, such as styles, tables of contents, and tables of figures; and the generation of ideas for improving risk management and the risk-return tradeoff. Importantly, the assessment is structured in parts, so that students can get feedback from each part before attempting the next part.

Assessment

GS1 GRADING SCHEMA 1 Used for standard coursework units

Students please note: The marks and grades received by students on assessments may be subject to further moderation. All marks and grades are to be considered provisional until endorsed by the relevant Board of Examiners.

Text References

• ^ Lange, H.P., Saunders, A., & Cornett, M.M. (2012). Financial institutions management. (3rd ed.). North Ryde, N.S.W.: McGraw-Hill
• Valentine, T., Ford, G., O?Hara, L., & Sundmacher, M. (2010). Fundamentals of financial markets and institutions in Australia. Brisbane: Pearson.
• Sathye, M., Bartle, & Boffey, R. (2013). Credit analysis and lending management (2nd ed.) Melbourne: Tilde University Press.
• Gupp, B.E., Avram, K., Beal, D., Lambert, R., & Kolari, J. (2007). Commercial banking: The management of risk. Milton: John Wiley & Sons Australia Ltd.
• Emerson, L. (2013) Writing guidelines for business students (5th ed.). Melbourne: Cengage Learning.
• Viney, C. (2012). Financial institutions, instruments and markets (7th ed.). North Ryde. NSW: McGraw-Hill Australia Pty Limited.
• Hogan, W., Avram, K.J., Brown, C., Degabriele, R., Ralston, D., Skully, M., et al. (2004). Management of financial institutions (2nd ed.). Brisbane: John Wiley & Sons Australia Ltd.

^ Mandatory reference

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