DECO 25A18 - Contemporary Perspectives in Financial and Banking Regulation

13 years after the worst financial debacle with the collapse of Lehman Brothers, the question of regulating the financial and banking sectors remain a top priority for the world's major countries. In Europe, the question has been taken seriously with the design of the European Banking Union. At the international level, members of the G-20 have created the Financial Stability Board in order to supervise financial institutions after the last major financial crisis. In the major countries affected by the crisis, regulators have been redesigning the supervisory scheme of financial markets and banking activities, taking into account the strong connection between the 2 sectors. Central banks have endorsed broader supervisory power. This course aims to provide an understanding of the transformations underway since the “subprime” crisis and the European sovereign debt crisis. This is a very complex topic since it requires a good understanding of the banking and financial activities. The course starts with an overview of the major changes in the banking sector over the past 30 years because of financial deregulation and globalization. Then it will explain the mechanisms underlying securitization and the reason for the strong development of the subprime market that led to the 2007 crisis. This helps to understand the interconnectedness of banks and financial markets. Then the course will focus on the banking regulation and supervision, in particular the role of central banks as lender of last resort and the capital regulation in the banking industry. A special attention will be dedicated to the Basel Accord. Basel III is now fully implemented at the European level and we will discuss the merits of the changes introduced in the light of the crisis. The course ends on the controversial issue of cryptocurrencies and their future.

Nathalie JANSON

Séminaire

English

Students are expected to read before class the indicated chapters from the textbooks. Class is an opportunity for illustrating and discussing further the concepts presented in the readings. It is supposed to be interactive. Electronic devices are a great tool but they are also addictively distracting. In this course, you are asked not using electronic devices (including, but not limited to, laptop computers, cell phones, tablets and so forth) during class time. That means you must take notes by hand or other non-electronic methods. Students are expected to read before class the indicated chapters from the textbooks: Mishkin F.S (M), and additionnal readings on cryptocurrencies and blockchain. Consequently class is an opportunity for illustrating and discussing further the concepts presented in the readings and it is therefore interactive. Students will work in team (ideally 3 students) on oral presentations.

Macroeconomics

Autumn 2021-2022

Press Review : 30% Team Presentation : 30% Final Paper : 40%

By the end of the course the student should have a clear understanding of: 1. The organization of the financial and banking system in developed economies like US and Euro. They should have a clear view of the changes that have affected the bank's traditional business in the last 30 years. 2. The banks' management: liquidity management, interest rate risk and credit risk management 3. The mortgage market, subprime market and the securitization process 4. The role played by central banks in the post- crisis era, in particular the revisited role of lender of last resort. 5. Bank capital requirements: the Basel Accord 6. Cryptocurrencies and government approach to their regulation