Bank Management

Course Code: BBA 412

Credit Hour: 3

Course Group: Core Courses

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Banking and the financial services industry: how do bank differ - organizational structure and financial services business models - different channels for delivering banking services.

Government policies and regulation: historical bank regulation - maintaining monetary stability - efficient and competitive financial system

Analyzing bank performance: commercial bank financial statements - the relationship between the balance sheet and income statement - the return of equity model - managing risk and returns - maximizing the market value of bank equity - financial statement manipulation.

Managing noninterest income and noninterest expense: noninterest income - noninterest expense - which lines of business and customers are profitable.

Pricing fixed-income securities: the mathematics of interest rates - future value and present value - simple versus compound interest - duration and price volatility - total return analysis - money market yields.

Managing interest rate risk: measuring interest rate risk with GAP - earnings sensitivity analysis - income statement GAP - managing the GAP and earnings sensitivity risk - economic value of equity sensitivity analysis.

Using derivatives to manage interest rate risk: characteristics of financial futures - speculation versus hedging - using forward rate agreement to manage rate risk - basic interest rate swaps as a risk management tool - interest rate caps and floors.

Funding the bank: the relationship between liquidity requirements, cash and funding sources - characteristics of retail type deposits - characteristics of large wholesale liabilities - electronic money - check 21 - measuring the cost of funds - the average historical cost of funds - finding sources and banking risks.

Managing liquidity: meeting liquidity needs - reserve balances at the central bank - meeting legal reserve requirements - liquidity planning - longer term liquidity planning - contingency funding.

The Effective Use of Capital: Why worry about bank capital? - risk-based capital standards - risk-based capital standards - what constitutes bank capital? - what is the function of bank capital? - how much capital is adequate? - the effect of capital requirements on bank operating policies - characteristics of external capital sources - capital planning - depository institution capital standards - federal deposit insurance.

Overview of credit policy and loan characteristics: Recent trends in loan growth and quality - measuring aggregate assed quality - trends in completion for loan business - the credit process - characteristics of different types of loans.

Evaluating Commercial loan requests and managing credit risk: fundamental credit issues - evaluating credit requests: a four-part process - credit analysis application: Wade's office furniture - managing risk with loan sales and credit derivatives.

Evaluating Consumer Loans: types of consumer loans - subprime loans - consumer credit regulations - credit analysis - recent risk and return characteristics of consumer loans.

Managing the Investment Portfolio: Dealer operations and the securities trading account - objectives of the investment portfolio - characteristics of taxable securities - prepayment risk on mortgage-backed securities - characteristics of municipal securities - establishing investment policy guidelines - active investment strategies - the impact of interest rates on the value of securities with embedded options - comparative yields on taxable versus tax-exempt securities - the impact of the tax reform act of 1986 - strategies underlying security swaps.

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Text Book:

Timothy W. koch, S. Scott MacDonald, Bank Management, 7th edition, South-Western Cenage Learning, USA.

Reference Books:

Peter S. Rose, Commercial Bank Management, Irwin/McGraw-Hill, USA. Paul F. Jessup, Bank Management, Holt, Rinehart & Winston, 1969.