This course deals with the management of commercial banking activities from risk management perspective. The prime focus of this subject is to manage major risks such as interest rate risk, credit risk, liquidity risk and operational risk faced by the banks to maximize the dual objectives of commercial banks i.e. profitability and liquidity. Mostly it deals with the management of deposits, lending activities, investments, bank capital, bank liquidity and off-balance sheet activities. It also covers the use of derivatives and asset backed securities such as credit derivatives etc. to manage the market risk. In addition to this, it also covers the basic features and role of commercial banks, regulatory aspects related to banking activities and evaluation techniques to measure financial performance of banks. Valuation of banks’ balance sheet items and mergers and acquisition of commercial banks are also discussed in this course.INTENDED AUDIENCE : Economics, Commerce and MBAPREREQUISITES : NilINDUSTRY SUPPORT : Banks, Financial Consulting Companies
Overview
Syllabus
Module-I: Functions, Regulation, Financial Statements and Performance
Week 1 :• Functions and Forms of Commercial Banking • Regulations of Commercial Banking • Banks’ Financial Statements
Week 2 : • Profitability Measures • Efficiency Measures • Stability Measures • Liquidity Measures • Loan Quality Measures
Module-II: Valuation of Securities and Commercial Bank Risk
Week 3 : • Pricing of Bank Stocks • Pricing of Fixed Income Securities of Commercial Banks Week 4 :
• Risk management process • Risk types: Credit risk, Market risk, Operational risk, Liquidity risk, Solvency risk, Legal risk • Risk measures
Module-III: Asset-Liability Management (ALM): Management of Interest Rate Risk
Week 5 :
• Static Gap Analysis • Earnings sensitivity analysis • Duration Gap analysis • Economic value of equity sensitivity analysis Week 6 :
• Use of Futures, Options, Swaps and Other Hedging Tools in ALM • Risk management using Asset-Backed Securities and Credit Derivatives
Module-IV: Management of Lending Activities of Commercial Banks
Week 7 : • Lending Functions • Loan PolicyWeek 8 : • Loan Pricing • Credit Evaluation Process for Industrial and Retail Loans
Module-V: Managing Investment Portfolios and Liquidity of Commercial Banks
Week 9 : • Investment Alternatives • Evaluation of Investment Risk • Investment StrategyWeek 10 : • Estimation of Liquidity Needs • Funds Management of Liquidity • Optimum Bank Liquidity
Module-VI: Management of Liabilities, Capital and Off-Balance Sheet Activities of Commercial Banks
Week 11 :
• Management of Deposits and other liabilities • Role of Bank Capital • Capital Adequacy • Capital Standards
Week 12 : • Financial Guarantee • Derivatives • Trade Finance • Foreign Exchange
Week 1 :• Functions and Forms of Commercial Banking • Regulations of Commercial Banking • Banks’ Financial Statements
Week 2 : • Profitability Measures • Efficiency Measures • Stability Measures • Liquidity Measures • Loan Quality Measures
Module-II: Valuation of Securities and Commercial Bank Risk
Week 3 : • Pricing of Bank Stocks • Pricing of Fixed Income Securities of Commercial Banks Week 4 :
• Risk management process • Risk types: Credit risk, Market risk, Operational risk, Liquidity risk, Solvency risk, Legal risk • Risk measures
Module-III: Asset-Liability Management (ALM): Management of Interest Rate Risk
Week 5 :
• Static Gap Analysis • Earnings sensitivity analysis • Duration Gap analysis • Economic value of equity sensitivity analysis Week 6 :
• Use of Futures, Options, Swaps and Other Hedging Tools in ALM • Risk management using Asset-Backed Securities and Credit Derivatives
Module-IV: Management of Lending Activities of Commercial Banks
Week 7 : • Lending Functions • Loan PolicyWeek 8 : • Loan Pricing • Credit Evaluation Process for Industrial and Retail Loans
Module-V: Managing Investment Portfolios and Liquidity of Commercial Banks
Week 9 : • Investment Alternatives • Evaluation of Investment Risk • Investment StrategyWeek 10 : • Estimation of Liquidity Needs • Funds Management of Liquidity • Optimum Bank Liquidity
Module-VI: Management of Liabilities, Capital and Off-Balance Sheet Activities of Commercial Banks
Week 11 :
• Management of Deposits and other liabilities • Role of Bank Capital • Capital Adequacy • Capital Standards
Week 12 : • Financial Guarantee • Derivatives • Trade Finance • Foreign Exchange
Taught by
Prof. Jitendra Mahakud
