AZƏRBAYCAN AZƏRBAYCAN RESPUBLİKASI

RESPUBLİKASI TƏHSİL İQTİSAD UNİVERSİTETİ (UNEC)

NAZİRLİYİ

AZERBAIJAN STATE UNIVERSITY OF ECONOMICS (UNEC)

INTERNATIONAL SCHOOL OF ECONOMICS (ISE)

BANKING COURSE SYLLABUS

COURSE NAME Banking
COURSE CODE
SESSION
CREDITS AWARDED
FORM OF
EDUCATION
COURSE LANGUAGE English
INSTRUCTOR Anar Mammadov, PhD
E-MAIL ADDRESS Anar_Mammadov@unec.edu.az
PREREQUSITES
Banking course is designed to impart students a practical understanding
and application of the fundamentals of banking, as well as international
finances drawing on the diverse experiences of market players. Emphasis
placed on the structure, principles of organization of contemporary
banking system, regulation and supervision, the variety of banking
PURPOSE OF THE
transactions, their practical aspects, up-to-date risk management and
SUBJECT mitigation of risks being an acute subject in banking nowadays.

This course is intended to convey the practical banking and financial

knowledge and skills for those seeking a successful career in government,
private banks or the non-profit-sector, as well as scholars in the field
whose research may be enhanced with banking skills, resources, and
governing theory.
LEARNING Students who successfully complete this subject will be able to:
OUTCOMES • Demonstrate a broad overview of financial system
• Diversity, principles, functions, and activities of banks and financial
institutions
• Develop a conceptual framework within which the key financial
decisions faced by multinational banks can be analyzed
• Get the insight of active and passive operations of banks
• Get the insight of assets and liabilities management in modern banks
• Demonstrate awareness of specifics of banking marketing
• Understand principles of managing risks in contemporary banks.
Gain understanding of control, monitoring, and risk management
techniques
THEACHING Lectures, group discussions, presentations, case analyses, quizzes,
METHODS group works, homework
MAIN RESOURCES Main Textbook:
The Economics of Money, Banking and Financial Markets, Global
Edition, 13th Edition by Frederic Mishkin
Additional Textbooks and Materials:
1. The Economics of Central Banking 1st Edition by Livio Stracca
2. The Regulation and Supervision of Banks: The Post Crisis Regulatory
Responses of the EU (Routledge Research in Finance and Banking Law)
1st Edition by Chen Chen Hu
3. Macroprudential Banking Supervision & Monetary Policy: Legal
Interaction in the European Union 1st ed. 2018 Edition by Luca Amorello
4. Dictionary of Finance, Investment and Banking Paperback – Jan. 14,
2014 by E. Banks

SUPPLEMENTARY Additionally, required reading will be given based on topics learned.

RESOURCES
 WEEKLY SCHEDULE

WEEK LIST OF TOPICS

1 Overview of Contemporary Financial System
The Structure and Organization Principles of Global Banking Systems. The Banking
System: Structure, Principles of Organization, Internal Hierarchy. Banking System in
2
Industrial Economies and Emerging Markets. Banking and the Management of
Financial Institutions
Understanding Private Banks’ Functions and Principles of Activity. Organisational
3
and Managerial Structure of a Private Bank. Internal Committees
Distinctions of Banks from other Credit Institutions
4
Central Banking System and its Functions. The Mega Regulator being an Integrated
5 Model of Financial Sector Supervision: Functions, Structure, Governance, Tasks and
Ultimate Objective
Main Policy Instruments of a Central Bank/Monetary Authorities. Systemic Stability.
6
Anti-Inflationary Policy
7 Banking Regulation and Supervision
8 Active and Passive Transactions of a Private Bank
9 Resources and Capital Base of Bank Assets: Composition, Structure, and Quality
Retail Lending: Organization and Procedure. Risk Analysis during Assessment of
10 Borrower’s Creditworthiness. Cash Flow Analysis as an Assessment Method of
Creditworthiness
Performance Analysis of a Private Bank. Financial Statement Analysis. Bank
11 Performance: Efficiency, Technological Change and Globalisation Portfolio
Management in Private Banks: Practical Implementation
Risk Management: Organisation, Management and Issues. Essence, Necessity, Risk
12
Concepts, Structure and Today’s Issues in Mitigating Risks
13 Assets and Liabilities Management: Essence, Necessity, Requirements, Structure of
ALCO Committee, and Today’s Issues
14 Factoring and Forfaiting as New Services in the Financial Industry
Bankruptcy of Banks. How Financial Crises Happen and How Policy Makers Should
15
Respond. How a Decade of Financial Crises Changed the World
 Grading method
The course grade will be based on the following
 Class participation* 10%
 Quiz and exercises** 10%
 Seminar work 10%
- Test (assessment: during the semester there will be 3 tests which will cover 15 lectures. If
student will not take the first mark of the test, he or she can do 2nd or 3rd test. When it comes
to the assessment of the test, according to the test; A, (A+B)/2, (A+B)/3.
- Presentation (Ppt). Presentation will assess according to the 11 required things
 Two short exam each being 10%
 Final exam 50%

Evaluation ECTS Level of knowledge %

grade
Excellent: outstanding performance, with A 91 – 100
only minor mistakes

Very good: above the average standards, but B 81 – 90

with some errors

Good: generally sound work with number of C 71 – 80

notable errors
Satisfactory: fair but with significant D 61 – 70
shortcomings

Sufficient: performance meets the minimum E 51 – 60

criteria

Unfair behavior or failure to appear for F 0-50

evaluation

Exams and quizzes:

Exams will take approximately 120 mins and quizzes 30-45 mins. Both will start at the beginning of
the class and turned in at the end of the allotted time. Students who arrive late will not be given
additional time. Students who continue working after the allotted time may lose up to 10 pts. All
exams are closed book, closed notes. However E-devices (cell phones, PDAs, I Phones, blackberries,
other texting devices, laptops, i pods, etc.) are not allowed. Quizzes will contain multiple-choice
problems which will be generally easy. The format for all exams will be true-false, multiple-choice,
open questions. Exam content is highly quantitative; a formula sheet including all equations covered in
class is provided. A sheet with necessary formulas and scratch paper will be provided.

Missing exams or quizzes

Students missing a test will receive a zero.
BANKING
MIDTERM EXAM QUESTIONS
N Questions Difficulty Variant
1. Overview of the financial system. Banking system 5
2. Describe principles of banking 10
3. Explain functions of financial intermediaries 5
4. What are the benefits of financial intermediation? 5
5. Describe the nature of financial intermediation and explain its 5
features.
6. Describe information economics for banking 10
7 Role of banking sector in country’s economy 5
8 Banks and non-banking credit institutions 5
9. What are the lenders and borrowers’ requirements? 5
10. Explain the terms: economies of scale and economies of scope. 10
11. Explain principal-agent problems. How are banks affected by 5
agency problems?
12. What is asymmetric information? Explain form of problems 10
13. What is Free-rider problem? Explain with example 10

1. Explain differences and similarities between banks and other 10

financial institutions.
2. Which modern bank services are available? Explain their 5
functions.
3. Explain current issues in banking 5
4. Describe types of corporate banking services 10
5. What is consequences and necessity of banking supervision? 10
6. Explain concept of correspondent banks 5
7. What will be the impact of the FinTech revolution on the 5
banking industry?
8. Describe investment, pensions and insurance services 10
9. Describe deposits and lending services with example 10

1. Describe the concept of traditional versus modern banking and 5

explain essence of universal banking.
2. What different types of banks offer personal or retail banking? 10
Explain its functions and duties.
3. Describe essence and functions of private banking 5
4. Explain main role of the investment banking and its difference 5
from other financial institutions.
5. Describe different types of banks and explain the differences 10
between them
6. Distinctions of banks from other credit institutions 5
7. Describe foreign exchange and interest rate-related 10
transactions services
8. What is commitments and guarantees in banking services for 10
large (multinational) corporate clients?
9. Describe credit and other debt financing facilities in banking 5
services for large (multinational) corporate clients?
10. What is foreign exchange and interest rate-related transactions 10
in banking services for large (multinational) corporate clients?
11. What is debt finance in banking services for small firms? 5
12. What is equity finance in banking services for small firms? 5

1. What is international banking? Explain its reasons and 5

importance.
2. Explain the main reasons for banks going overseas to give 10
services.
3. What are the types of bank entry into foreign markets? 5
4. What kind of bank products and services are for the 10
international business?
5. Explain practice of bank expansion in foreign markets. 5
6. Advantages and disadvantages of international and cross 5
border banking
7. Explain trade finance and its forms in international banking 5
services
8 Explain syndicated lending and its types and facilities 5
9. Describe commercial banking services in in international 5
banking activity
10. What is forfaiting and explain mechanism, how different it is 10
from factoring and draw a scheme depicting the factoring
process
11. What is factoring? explain mechanism, how different it is from 10
forfaiting and draw a scheme depicting the factoring process.
12. What is performance analysis of a commercial bank? Explain 5
with example

1. Explain the main functions of a central bank 5

2. Monetary policy functions of a central bank: Explain monetary 10
policy instruments, targets and goals.
3. What is the importance of central bank for banks and free- 5
banking hypothesis?
4. Explain debt securities and open market operations in the case 10
of central bank
5. What are the five major forms of economic policy? 10
6. Can central banks function as commercial ones? Give 10
 explanation in any cases
7. Lender of last resort function of central banks. Detail its core 5
and necessity
8. What is the reason for lending to banks and the discount 5
window?
9. Explain reasons and importance of reserve requirements 5
10. Describe features of bank system in the case of a country. 10
11. Case of Azerbaijan: three options set by the Central Bank if 5
case commercial banks do not meet the minimal requirement
to their authorized capital
12. Explain other instruments of portfolio constraint 5
13. Why do banks need a central bank? Explain with example 5

1. Explaine four major sources of commercial bank funds and its 10

functions.
2. What alternatives does a commercial bank have if it needs 5
temporary funds?
3. Describe the various long-term sources of funds available for a 5
commercial bank
4. What kind of loan do commercial banks prefer to use more to 10
generate a higher return?
5. Explain what alternatives are there in use of funds except for 10
giving credit.
6. Show an understanding of the idea behind off-balance sheet in 5
banking.
8 Asset classification by degree of profitability 5
9 Highly liquid, liquid, and long-term liquidity assets 5
10. Explain essence and necessity of shareholders’ equity 10
11. Provide explanation and economic meaning of liquidity 5
12. Explain relation between liquidity level and demand on 5
specified objects of bank allocation
13. Explain highly liquid, and long-term liquidity assets 5
14. Explain essence and necessity of shareholders’ equity 5
15. Describe the economical meaning of collateral and provide its 10
peculiarities in view of specifics of Azerbaijan
16. 1. Asset securitisation as a liquidity management facility 10
General Questions — Banking (75)

2. Overview of the financial system. Banking system

3. Detail the structure and principles of organization of the banking system
4. Describe principles of banking
5. Explain functions of financial intermediaries
6. Explicate functions of banks
7. Illustrate tiers (levels) of banking system
8. Distinctions of banks from other credit institutions
9. Role of banking sector in country’s economy
10. Banks and non-banking credit institutions
11. What is Money?
12. Detail commercial banks’ functions and principles of activity
13. Consequences and necessity of banking supervision
14. Concept of correspondent banks
15. Authorized capital: its purpose and necessity
16. Can central banks function as commercial ones? Give explanation in any case.
17. Central banking system and its functions
18. Lender of last resort function of central banks. Detail its core and necessity
19. Selective qualitative controls: margin requirements
20. Regulation of consumer credit
21. Directives control (direct action)
22. Moral suasion vs. credit rationing. Explain each and give their core and necessity
23. Limitations of selective controls
24. Consequences and necessity of banking supervision
25. Case of Azerbaijan: three options set by the Central Bank if case commercial banks do not
meet the minimal requirement to their authorized capital
26. Elucidate four principles of a commercial bank. Detail each one
27. Give definition of bank assets
28. Give breakdown of features of assets
29. Provide explanation and economic meaning of liquidity
30. Provide explanation and economic meaning of profitability
31. Relation between liquidity level and demand on specified objects of bank allocation
32. Highly liquid, liquid, and long-term liquidity assets
33. Explain definition of “deep” assets
34. Is there a necessity, for a bank, for “deep” assets? Give reasons
35. Asset classification by degree of profitability
36. Highly liquid, liquid, and long-term liquidity assets
37. Explain essence and necessity of shareholders’ equity
38. Elucidate principles of bank fees (commissions)
39. Elucidate intermediary banks
40. Earning vs. non-yielding assets
41. Tier I and Tier II capital
42. Bankruptcy of banks: causes and remedies
43. Major causes of business failures. What key issues must managers face in the financial
distress process?
44. Elucidate refinancing rate and how it affects the overall crediting process
45. Debt ratios and their economic meaning
46. Detail Liquidity ratios
47. The difference between current and quick ratios
48. Detail Profitability ratios
49. Detail Capital adequacy ratios
50. Performance analysis of a commercial bank
51. How financial crises happen and how policy makers should respond
52. Classify bank risks
53. Managing the liquidity and solvency of a commercial bank
54. Performance analysis of a commercial bank
55. Overdraft in banking: to whom it may be granted and terms of such overdraft
56. Detail Liquidity risks
57. Detail Credit risks
58. Detail Market risks
59. Detail Currency risks
60. Detail Financial risks
61. Detail Industry risks
62. Stress testing in banks. Contingency funding plans (CFP)
63. Internal committees. Explicate in detail all committee. Their role in banks’ management
64. Organization and procedure of corporate lending. Assessment method of the
creditworthiness of the borrower
65. Loan application. List all stages of the document and how they affect a decision
66. Asset and liabilities management. Provide a detailed description and the necessity of these
67. What is factoring? Define detailed mechanics, parties involved along with eight steps in
factoring. Draw a scheme depicting the factoring process
68. Detail four types, and pros and cons of factoring
69. What is forfaiting? Mechanism, how different it is from international factoring. Essential
requisites of forfaiting transactions. Define detailed mechanics of forfaiting
70. Working capital as financial metric. Its goal. Objective of working capital management.
Working capital formula vs. working capital ratio. What does negative working capital
show? What an idea does it give to investors? The worst-case scenario
71. Liquidity, safety and profitability as objective of portfolio management
72. Seven principles for effective loan portfolio and risk management
73. Describe the economical meaning of collateral and provide its peculiarities in view of
specifics of Azerbaijan
74. Asset securitisation as a liquidity management facility
75. Early warning indicators identifying the emergence of vulnerabilities in a bank’s potential
funding needs. Provide their breakdown
76. Role of internal committees in banks. Detail role of each