Banking and Financial Innovation

FIE448 Banking and Financial Innovation

  • Topics

    Topics

    This is a master-level course consisting of the basic microeconomic theory of banking, financial innovation, and financial crisis, and discussing practical issues related to these theories.

    1. Introduction : Banking, financial innovation and financial crisis.
    2. The role of financial markets : Why do we need financial markets? The role of financial markets, and transaction costs in financial markets.
    3. Existence of banks : Why does bank exist? Functions of banks; the model of bank loans; agency problems (adverse selection and moral hazard) and the design of loan contracts.
    4. Financial innovation : The underlying theory of certain financial innovation. How did securitization contribute to the 2008-2009 financial crisis?
    5. Bank runs, financial crisis and regulation : Why bank runs? How to stop a bank run? What is special in the 2008-2009 financial crisis? Introduction to bank risk management and regulation.
    6. FinTech : The new developments in the banking sector. Can FinTech kill banks?

  • Learning outcome

    Learning outcome

    After this course, students are expected to

    Knowledge:

    • Understand the important economic roles of financial intermediaries, such as the role of commercial banks, investment banks and other financial intermediaries, both in theory and in practice.
    • Understand the main businesses and products of banks, especially those of commercial banks, both in theory and in practice. These products reflect the economical roles of banks and are linked to various risks of banks.
    • Understand bank runs and how it can start a financial crisis, both in theory and in practice. Especially, the 2007-2009 Financial Crisis were initiated from the subprime crisis and runs on repos.
    • Understand how various bank regulations to prevent or stop a bank run or financial crisis, both in theory and in practice.
    • Understand recent financial innovation in the banking sector and their underlying motives, both in theory and in practice. Know how securitization "creates" the 2007-2009 financial crisis.
    • Know the new developments in the banking sector, such as FinTech, and be aware of the main FinTech advances and their motives.

    Skills and General Competence:

    • Using the concepts, methods and knowledge that are introduced in the course, you should be able to analyze and write professional reports, articles and business cases concerning banking, financial innovation (FinTech) and financial crises.
    • Through the course, you should have developed good analytical skills, have learned to work independently with advanced problems in banking, and be capable of applying new knowledge throughout your career.

  • Teaching

    Teaching

    Plenary lectures.

    There will be three non-mandatory assignments for students to prepare for the final exam.

  • Requirements for course approval

    Requirements for course approval

    Approved mandatory term paper. You are encouraged to collaborate on the term paper. Each team should have 1 to 3 members, and you hand in one solution per team.

  • Assessment

    Assessment

    Final exam, comprising a 4-hour written exam. The exam will be given only in English and has to be written in English.

  • Grading Scale

    Grading Scale

    Grading scale A - F.

  • Computer tools

    Computer tools

    None

  • Semester

    Semester

    Spring

  • Literature

    Literature

    The course material consists of selected articles from academic journals, and a small textbook (provided by the lecturer at the beginning of the course) and lecture notes based on the articles.

Overview

ECTS Credits
7.5
Teaching language
English
Semester
Spring, Autumn

Course responsible

Xunhua Su, Department of Finance