Commercial Banking 3 s.h.
The banking industry has undergone massive transformation due to deregulation and competition from non-banks in the last decade. In the near future, the shape and scope of commercial banks will look nothing like its past. For example, with the slow demise of Glass-Steagall Act (1933), the separation between commercial and investment banks has become blurred. Recently, several banks have received approval to underwrite debt and equity offerings. This course examines recent trends in regulation and product innovation by commercial banks. The objective is to equip students with principles and tools which allow them to tackle realistic risk management problems associated with financial institutions. Topics include bank organization and regulation structure of the U.S. banking industry; role of bank regulation from a historical perspective; competition from non-banks; evolution of commercial banking in the U.S.; Community Reinvestment Act and bank mergers; role of CRA in lending practices by banks; the role of CRA in bank mergers; role of investment banks in mergers and acquisitions; organization of commercial banks for operations--importance of size markets; asset and liability management; GAP analysis: measuring changes in net interest income; duration GAP: managing changes in market value of equity; use of futures and swaps to hedge interest rate exposure; characteristics of financial futures: speculation versus hedging; interest rate swaps as a hedging tool; capital risk management and credit policy; risk-based capital standards; how much capital is adequate; global banking issues, foreign banking activities in the U.S.; U.S. versus Japanese/German financial system.