BERGAMO
Overview
Date/time interval
Syllabus
Course Objectives
The course contributes to the student's education in business and finance by providing the conceptual, regulatory and quantitative tools needed to understand the management of financial institutions, with a specific focus on banks.
By the end of the course, students will be able to:
1. explain the role of the financial system in resource allocation, maturity and risk transformation, and the transmission of monetary policy;
2. distinguish financial markets, financial intermediaries and banks, understanding their complementarities, operational features and regulatory profiles;
3. interpret the basic structure of bank financial statements and connect the main balance-sheet and income-statement items to the key areas of bank management;
4. analyse banks' funding, lending, liquidity and treasury policies and assess their effects on profitability, risk and regulatory constraints;
5. measure and interpret credit risk using PD, LGD, EAD, expected loss, unexpected loss, ratings, scoring models, credit registers, forbearance, NPLs and impairment;
6. understand the role of regulatory and economic capital, Basel requirements, credit risk mitigation techniques, collateral, guarantees, CDSs, securitisations and risk-adjusted performance indicators;
7. apply models and formulas to numerical cases involving loan pricing, capital absorption, interest-rate risk, fair value, amortised cost, loan-loss provisions and risk-adjusted profitability; use of derivative instruments
8. develop independent assessments of real banking cases, justifying managerial decisions in terms of economic convenience, risk, capital, liquidity and prudential sustainability.
The course therefore aims to develop not only descriptive knowledge, but also applied skills and judgement consistent with the main professional issues in bank management.
Course Prerequisites
Basic knowledge of accounting, financial statements and financial mathematics. In particular, students are expected to be able to read the main items of a balance sheet and income statement, use interest rates, discounting and compounding, and interpret ratios and financial indicators.
For compulsory prerequisites, students should refer to the official webpage of the Degree Programme. https://lt-ea.unibg.it/it/node/106..
Teaching Methods
Teaching activities include lectures, quantitative exercises and analysis of institutional documents, banking data and financial statements of financial intermediaries. Theoretical lectures are complemented by numerical examples and applied cases dealing, among others, with expected loss, unexpected loss, scoring, ratings, credit registers, NPLs, forbearance, capital absorption, collateral and guarantees, CDSs, securitisations, fair value, amortised cost, derivative instruments and interest-rate risk.
During the course, exercises will be solved in class to assess students' ability to use formulas, indicators and decision-making frameworks. True/false or multiple-choice questions, short cases and discussions focused on the economic interpretation of results will also be proposed. The teaching method is designed to connect theoretical concepts to actual bank management and to avoid purely mnemonic learning.
During the academic year, four optional preparation and self-assessment tests will be offered, two of which will take place in person in a computer laboratory. These tests are designed to encourage progressive and continuous preparation and to allow students to assess their learning progress before the final exam.
Teaching materials made available on the e-learning platform complement, but do not replace, the systematic study of the texts and topics indicated in the syllabus.
Assessment Methods
The exam is written and is graded on a thirty-point scale. The exam is designed to assess both knowledge of the fundamental concepts and the ability to apply them to managerial and quantitative problems concerning financial intermediaries and, in particular, banks.
The written exam is normally composed of:
1. Seven exercises or applied cases, for a maximum total score of 21/30. The exercises may require calculations, interpretation of results, comparison between managerial alternatives, and application of formulas relating to bank financial statements, funding, lending, credit risk, expected and unexpected loss, capital, guarantees, NPLs, securitisations, derivatives, interest rate risk, fair value and amortised cost.
2. Three questions consisting of true/false statements or multiple-choice questions, for a maximum total score of 9/30.
The assessment of the exercises takes into account the accuracy of the calculations and, therefore, of the results, which must be reported on the answer sheet. The assessment of the true/false or multiple-choice questions takes into account the correctness of the answers and the accuracy in identifying the correct alternatives.
The exam lasts 70 minutes and is passed with a grade of at least 18/30. Honours may be awarded when the student submits a completely correct exam within 60 minutes. There is no mandatory oral exam.
During the year, four optional preparation and self-assessment tests will be held, two of which will take place in person in the computer lab. These tests are intended to encourage continuous preparation and to reduce a study approach concentrated exclusively close to the final exam. Participation is not compulsory and does not prevent students from taking the final exam.
Contents
The course is organised into the following blocks, presented in a sequence consistent with the development of the expected competences.
1. Financial system and financial intermediation: functions of the financial system; markets and intermediaries; financial assets and liabilities; maturity, risk and liquidity transformation; monetary and credit functions.
2. Specific features of banks: stylised structure of the bank balance sheet and income statement; net interest income, fees, operating costs, loan-loss provisions and net income; main indicators of structure, profitability and risk.
3. Supervision, regulation and central banking: ECB, monetary base, bank reserves, monetary policy and liquidity; European Banking Union; prudential supervision; Basel 2 and Basel 3; own funds, capital requirements, leverage and liquidity; introduction to MREL and TLAC.
4. Bank funding, liquidity and treasury management: direct and indirect funding; retail and wholesale funding; cost, stability and consistency of funding with lending; bank liquidity and treasury management; managerial constraints and trade-offs.
5. Lending policy and the credit process: screening, approval, monitoring and recovery; bank-firm relationships; fundamental and behavioural analysis; credit registers; adverse selection and moral hazard.
6. Credit risk: default risk, exposure risk, recovery risk, concentration risk, country risk, downgrade risk and spread risk; PD, LGD, EAD and recovery rate; expected and unexpected loss; diversification and default correlation.
7. Estimating and managing PD: scoring, Altman's Z-score, internal and external ratings, mapping approach, actuarial approach; default rates and mortality rates; managerial and regulatory use of ratings.
8. Non-performing loans and impairment: classification of performing and non-performing exposures; bad loans, unlikely to pay and past-due exposures; forbearance and ROF; IFRS 9, staging, expected credit losses and value adjustments; calendar provisioning; Texas ratio.
9. Capital, performance and risk mitigation: economic capital, CaR and credit VaR; RWA and capital requirements; standardised and IRB approaches; collateral and guarantees; mutual guarantee institutions; RORAC and RAROC.
10. Credit risk transfer and NPL management: internal and external NPL management; outright sale; AMC and bad banks; CDSs; traditional and synthetic securitisations; tranching, senior/mezzanine/junior notes, price gap and effects on capital, liquidity and profitability.
11. Derivative instruments in bank management: knowledge and operational use of futures, options and swaps as tools for hedging and managing risks, with specific reference to interest-rate risk and credit risk; cash-flow logic, mark-to-market and managerial effects. Theoretical pricing and analytical valuation of derivatives are excluded from the syllabus.
12. Securities portfolio, valuation and interest-rate risk: fair value, amortised cost, effective interest rate and impairment; basic accounting classification of financial instruments; interest-rate risk on margins and economic value; maturity gap and duration gap.
13. Other financial intermediaries and recent developments: introduction to non-bank and insurance intermediaries; changes in the banking industry, digitalisation, regulatory pressure and emerging risks.
Online Resources
More information
The syllabus and assessment methods are the same for attending and non-attending students. Attendance is, however, strongly recommended, as exercises, cases and links between topics are discussed during lectures, thereby facilitating preparation for the exam.
The teaching materials uploaded to the e-learning platform, the exercises solved during the course and any institutional documents discussed in class are an integral part of the learning process. The exercise sets prepared by the instructor and the exercises included in the lecture slides are essential tools for exam preparation, since the reference textbooks do not include exercises. The reference textbooks are indicated and updated through Leganto, in accordance with the procedures established by the University.
Any updates to the teaching materials or operational clarifications will be communicated through the institutional channels of the course.