Financial Regulation

Course goals

Learning objectives
At the end of the course the student is able to:

• Apply the concepts of transaction costs, liquidity insurance, moral hazard, and adverse selection to financial markets and banking
• Establish the link between theory and empirical and/or anecdotal evidence of financial markets failures
• Explain the justification for, and impact and limitations of, financial regulation
• Compute and interpret the key indicators used in regulatory requirements for banks (Basel)
• Understand and critically evaluate current advancements in the literature

Content

Please note the prerequisites for this course at the bottom of the course description.

The course Financial Regulation has been designed to introduce students to some of the key economic concepts, principles, and problems in the regulation of financial activities. The course deals both with the theoretical economic underpinnings of financial regulation as well as with the extant international regulatory framework, with a particular focus on Europe and the US. The course illustrates why financial intermediaries exist, how market failures affect the industry and how regulation attempts to deal with them. A special focus will be given to the regulatory framework for banks (Basel) and to the severe challenges to regulation posed by systemic risk phenomena and by the “shadow” banking system.

Prerequisites
Students in Banking & Finance, Financial Management and Sustainable Finance and Investments should have no problem taking the course. Master students from one of the programmes in Economics should be able to take the course with some extra effort. The course assumes an intermediate knowledge of finance and a basic knowledge of microeconomics and statistics: discounted cash-flows; yields, interest rates, net return, basic knowledge of derivatives (e.g., forward/futures; options) and how to price them, basic accounting, normal and binomial statistical distributions, and basic utility maximization, i.e., Lagrangian functions. Students from other master programmes are not encouraged to attend, unless they have taken at least two prior finance courses during their bachelor and/or master programs.


In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. Please note that access codes are not re-usable meaning that codes from second hand books do not work, as well as access codes from books with a different ISBN . Separate or spare codes are usually not available.