EC327-Economics of Banking

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Level:6
Terms in which taught: Spring term module
Pre-requisites: EC201 Intermediate Microeconomics and EC202 Intermediate Macroeconomics
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2020/1

Module Convenor: Dr Tho Pham

Email: t.pham@reading.ac.uk

Type of module:

Summary module description:

This module provides students with a guide to the economic theory of banking covering the recent developments in academic research with a focus on the microeconomics of banking. The module will address important issues including the economic theory of bank intermediation pointing out the weaknesses in the banking sector, strategies adopted by banks to address risks, economic assessment of competition and stability in banking, the rationale for government intervention, and banking regulation. 

Aims:

This module aims to enable students to apply economic principles and models to understand the role of banking in the financial markets and wider economy, and to critically evaluate current debates on competition, stability and regulation in the banking sector.

Assessable learning outcomes:

At the end of the module, students should be able to:

• Explain what distinguishes banks from other firms and the role of intermediation


• Demonstrate tools available for banks addressing risks


• Assess how banks compete based on relevant economic models and its impact on competition-stability trade-off


• Evaluate why the banking sector is subject to regulations


• Appreciate the role of banking in the finan cial markets and wider economy

Additional outcomes:

Students should be able to read and understand project reports and journal articles that make use of the concepts and methods that are introduced in the course.

Students will improve their ability to translate abstract theoretical concepts into practical solutions to real-world problems in the relevant context.

Outline content:

The module will cover the following main topics:

• Economic theory of bank intermediation including:
  
  
  
  • Why do banks exist?
  
  
  • Why are banks different from other firms?
  
  
  • Issues related to bank lending
  
  
  
  


• Risks and risk management in banking sector


• Banking regulation covering:
  
  
  
  • The rationale for intervention.
  
  
  • Different forms of regulation.
  
  
  
  


• Current debates on the tension between bank competition, stability and regulation.

Brief description of teaching and learning methods:

Formal lectures supported by class discussions, problem solving related activities and independent study.

Contact hours:

	Autumn	Spring	Summer
Lectures		20	2
Guided independent study:		160	18
Total hours by term		180	20
Total hours for module	200

Summative Assessment Methods:

Method	Percentage
Written exam	60
Written assignment including essay	40

Summative assessment- Examinations:

One 3-hour unseen written paper. Part 3 examinations are held in the Summer term.

Summative assessment- Coursework and in-class tests:

Written coursework accounting for 40% (submitted in the last week of the Spring term).

Formative assessment methods:

Required text book (Recommended, but not a compulsory purchase) is Frank J. Fabozzi, Edwin H. Neave and Guofu Zhou, Financial Economics, John Wiley and Sons, 2012. Hard copies are available in the library.

Penalties for late submission:

The Module Convenor will apply the following penalties for work submitted late:

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day[1] (or part thereof) following the deadline up to a total of five working days;
• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: http://www.reading.ac.uk/web/FILES/qualitysupport/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

40%.

Reassessment arrangements:

Re-examination for all modules takes place in August of the same year.

Re-assessment is by examination only; coursework is not included at the second attempt.

Additional Costs (specified where applicable):

Required text books (Recommended, but not a compulsory purchase) include:

Greenbaum, S., and A. Thakor. 2016. Contemporary Financial Intermediation. 3rd ed. Burlington, MA: Academic Press.

VanHoose, David D. 2010. The industrial organization of banking: bank behavior, market structure, and regulation. 2nd ed. Berlin, London: Springer, 2010.

(eBooks are available in the library.)

Last updated: 4 April 2020