BU.231.710.

XX – Financial Institutions – Instructor’s Name – Page 1 of 5

Financial Institutions
2 Credits

BU.231.710.XX
[NOTE: Each section must have a separate syllabus.]

[Day & Time / ex: Monday, 6pm-9pm]

[Start & End Dates / ex: 3/24/15-5/12/15]

[Semester / ex: Fall 2016]

[Location / ex: Washington, DC]

Instructor
[Full Name]

Contact Information
[Email Address]
[Phone Number, ###- ###-#### (Optional)]

Office Hours
[Specify the day and time of the 2 hours that will be dedicated to office hours each week. For evening classes,
faculty may wish to hold their office hours by phone or email. While faculty are permitted to state “and by
appointment,” office hours should not be held exclusively by appointment.]

Required Texts & Learning Materials

Saunders, A. & Cornett, M. M. (2018). Financial institutions management: A risk management approach (9th
ed.). New York, NY: McGraw-Hill Education. ISBN-13: 978-1-259-71777-2.

Additional readings on specific topics covered will be assigned before and during classes.

Recommended Texts
Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments (10th ed.). New York, NY: McGraw-Hill Education.
ISBN: 978-0-07-786167-4. A good review and reference book.

Course Description
The financial service industry plays a significant role in the economy and it continues to undergo dramatic
changes. Financial institutions (FIs) perform the essential function of channeling funds from savers to users of
funds. Financial intermediation is subject to a significant risk as the recent financial crisis vividly illustrated. The
risk management of FIs is crucial not only in maximizing shareholders’ value, but also in ensuring the stability
of the whole financial system. In this course, we focus on the measurement and management of fundamental
risks of banks (depository institutions).

For example, banks hold assets that are exposed to default or credit risk. Banks also tend to mismatch the
maturities of their balance sheet assets and liabilities, and therefore are exposed to interest rate risk. Banks
holds funds their portfolios of illiquid assets with deposits and their short-term liabilities, and hence they are
exposed to liquidity risk. When they operate in foreign currency they take on foreign exchange risk. Banks can
manage their risks in a variety of ways. Furthermore, banks need to manage the uncertainty of the earnings of
their trading portfolios caused by extreme market changes, a risk that is known as its market risk. Liability
management, loans sales and securitization, portfolio diversifications, and capital adequacy are alternative
ways to manage these risks.

Prerequisite(s)
BU.231.620 OR BU.910.611

Learning Objectives
By the end of this course, students will be able to:
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1. Understand the function of financial intermediaries in the economy and how this role has changed in
the United States, and particularly banks; understand the sources of the risks of a bank (e.g., interest
rate risk, market risk, credit risk, liquidity risk, etc.).
2. Measure the interest rate risk of a bank from the book value perspective and the market value
perspective; measure the credit risk of a single security and a portfolio; understand sovereign risk.
3. Measure liquidity risk and liquidity management; understand foreign exchange risk and measure
market risk.
4. Understand the benefits and the pitfalls of securitization.
5. Estimate capital adequacy: a book value perspective and a market value perspective.

To view the complete list of the Carey Business School’s general learning goals and objectives, visit the Carey
website.

Attendance
Attendance and participation contribute up to 20% of the final grade. Attendance (on-time) is proper business
etiquette and a minimal requirement for classroom participation. Being late or leaving early—if repeated three
times—is going to be considered an absence. There will be an attendance sheet to be signed at the beginning
of every class. Forging signatures for others will get zero credit for attendance and participation for the whole
course (i.e., 20 points out of 100). Emergencies with proper documentation will be exempted (emergencies
outside the immediate family cannot be excused). Please note that business trips and job market interviews do
not count as emergencies.

Assignments

Assignment Learning Objectives Weight

Participation and assigned readings 1–5 20%
2–3 Pop-up quizzes (10% or 15% each) 1–5 30%
Final exam 1–5 50%
Homework assigned 1–5 0%
Total 100%

Class Discussion and Participation Rubric

Attendance and participation contribute up to 20% of the final grade. This is made up of 2 points per class
for 7 classes, plus 6 points of bonus. Class participation and contribution will be graded 0–5 according to
the following objective and subjective criteria (points are per class):

0 = Miss class without justification. (Job interviews and job search activities are not excused
absences.) Class attendance is a prerequisite for class contribution; therefore, students will earn a 0
on days they do not attend class without justification.

0 = Negative participation. Chatting, use of electronics, sleeping, and interference with other
students’ participation and learning is negative participation and will be penalized by earning the same
grade as an absence without justification.

1 = Passive attendance (7 points out of 20 in total). A minimal grade is assigned for attendance
without active participation. Passive attendance still requires bringing the name-tag to class and
displaying it in a visible manner, following instructions, and working in groups as directed. Missing
class with justification will earn 1 point.

2 = Active participation (14 points out of 20 in total). Active participation includes asking questions,
answering questions, contributing to the discussion of homework, quiz solutions, and presenting
assigned group work and activities. Participation does not include group contributions during
homework outside the classroom.

Valuable contributions are observations that advance the discussion or change the direction of the
class discussion, insightful commentaries that raise learning points, probing questions that challenge
the extant discussion and yield new directions, and analyses that clarify and amplify case facts.
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6 = Bonus points. The remaining 6 points can be earned by showing clear evidence of completing
the assigned readings before class (1 point per instance), with an extra contribution to class (1 extra
point per contribution) such as bringing relevant newspaper article or other relevant material to class,
and participating actively three (3 points), four (4 points), and five classes (5 points) in a row.

Pop-up Quizzes
Will cover only the material in the prior lectures: together worth 30% of total grade (two quizzes with 15%
weight each or 3 with 10% weight each). Questions will be multiple choice or true and false, but may
require solving problems. The quizzes is designed to ensure that you keep up with the material. The
answers to the quizzes will be posted in Blackboard and discussed in class the following week; the
quizzes will be returned.

No makeups will be given for a missed quiz. If you are absent, and therefore miss the quiz, the
weight assigned to that quiz will be added to your final exam score.

Homework
There are readings assigned for each class, and they are part of the homework. The class slides and the
examples worked out in class are not meant to substitute for these readings or the assigned problem sets.
There will also be weekly problem sets assigned, listed in Blackboard, corresponding to lectures 1–6. No
assignment will be made after lecture 7.

The problem sets will not be turned in or graded but may be discussed in class and is intended to give you
a good indication of what you are expected to know and how well you are mastering the material. If you
find that you have difficulty with the homework problems after studying the chapter and the lecture notes,
you should take that as a sign that you need to put more time into the course and seek advice from the
instructor. The answers to the homework problems will be provided in Blackboard, but ONLY the following
week in order that you put the effort into answering the homework problems yourself. You are free to work
with other students on the homework assignments and you are encouraged to do so.

If homework answer keys posted on Blackboard are unclear it is your responsibility to seek clarification
from the instructor in class or at office hour.

Final Exam
A final exam will be given in week 8. Questions will be multiple choice, or true and false questions, but
may require solving problems or include essay questions. The exam will be comprehensive, including the
first introductory class and the seventh class on the global crisis. The answers to the final exam will be
posted in Blackboard, but the exams will not be returned. You can ask to see your exam at office hour.

You cannot miss the final exam and there is no makeup for the final exam; it must be taken at the
time scheduled.

Grading
The grade of A is reserved for those who demonstrate extraordinarily excellent performance as determined by
the instructor. The grade of A- is awarded only for excellent performance. The grades of B+, B, and B- are
awarded for good performance. The grades of C+, C, and C- are awarded for adequate but substandard
performance. The grades of D+, D, and D- are not awarded at the graduate level (undergraduate only). The
grade of F indicates the student’s failure to satisfactorily complete the course work.

Please note that for Core and Foundation courses, a maximum of 25% of students may be awarded an A
or A-; the grade point average of the class should not exceed 3.3. For Elective courses, a maximum of
35% of students may be awarded an A or A-; the grade point average of the class should not exceed 3 .4.
(For classes with 15 students or fewer, the class GPA cap is waived.)
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Tentative Course Calendar

The instructors reserve the right to alter course content and/or adjust the pace to accommodate class
progress. Students are responsible for keeping up with all adjustments to the course calendar.

Week Topic Reading Homework

1  A brief review of the Subprime crisis Text, Chapters 1–2 Homework 1
 The role of the financial service industry and assigned
banks in particular
 A brief overview of the U.S. financial system,
and its evolution

2  Preview of the types and the sources of risks to Text, Chapter 7 Homework 2
financial institutions assigned
 Interest rate risk: Repricing model and duration Text, Chapters 8–9
analysis

3  Credit risk: Individual loan risk and portfolio risk Text, Chapters 10–11 Homework 3
 Sovereign risk assigned
Text, Chapter 14

4  Liquidity risk Text, Chapters 12, 18–19 Homework 4

 Liquidity and liability management assigned
 Deposit insurance

5  Loan sale and securitization Text, Chapters 25–26 Homework 5

assigned

6  Foreign exchange risk Text, Chapters 13, 15 Homework 6

 Market risk assigned

7  Capital Adequacy Text, Chapter 20

 Review

8 In-class, closed-book final exam: Covers content

taught from weeks 1–7
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Carey Business School Policies and General Information

Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site throughout the
semester as Blackboard will be the primary venue for outside classroom communications between the
instructors and the students. Students can access the course site at https://blackboard.jhu.edu. Support for
Blackboard is available at 1-866-669-6138.

Disability Support Services

All students with disabilities who require accommodations for this course should contact Disability Support
Services at their earliest convenience to discuss their specific needs. If you have a documented disability, you
must be registered with Disability Support Services (carey.disability@jhu.edu or 410-234-9243) to receive
accommodations. For more information, please visit the Disability Support Services webpage.

Academic Ethics Policy

Carey expects graduates to be innovative business leaders and exemplary global citizens. The Carey
community believes that honesty, integrity, and community responsibility are qualities inherent in an exemplary
citizen. The objective of the Academic Ethics Policy (AEP) is to create an environment of trust and respect
among all members of the Carey academic community and hold Carey students accountable to the highest
standards of academic integrity and excellence.

It is the responsibility of every Carey student, faculty member, and staff member to familiarize themselves with
the AEP and its procedures. Failure to become acquainted with this information will not excuse any student,
faculty, or staff from the responsibility to abide by the AEP. Please contact the Student Services office if you
have any questions. For the full policy, please visit the Academic Ethics Policy webpage.

Student Conduct Code

The fundamental purpose of the Johns Hopkins University’s regulation of student conduct is to promote and to
protect the health, safety, welfare, property, and rights of all members of the University community as well as to
promote the orderly operation of the University and to safeguard its property and facilities. As members of the
University community, students accept certain responsibilities which support the educational mission and create
an environment in which all students are afforded the same opportunity to succeed academically. Please contact
the Student Services office if you have any questions. For the full policy, please visit the Student Conduct Code
webpage.

Student Success Center

The Student Success Center offers free online and in-person one-on-one and group coaching in writing,
presenting, and quantitative courses. For more information on these services and others, or to book an
appointment, please visit the Student Success Center website.

Other Important Policies and Services

Students are encouraged to consult the Student Handbook and Academic Catalog and Student Services and
Resources for information regarding other policies and services.

Copyright Statement
Unless explicitly allowed by the instructor, course materials, class discussions, and examinations are created for
and expected to be used by class participants only. The recording and rebroadcasting of such material, by any
means, is forbidden. Violations are subject to sanctions under the Academic Ethics Policy.