75935 - Rules and Controls of Financial System

Learning outcomes

The course aims to present the main banking regulation tools, to understand and manage banking risks, specifically the typical "credit risk". At the end of the course, the student will be capable of analyzing the economic motivations of financial regulation concerning banks and financial markets, with specific reference to the rules governing the bank-businesses relationship. The student will be capable of analyzing the main contents of the Basel Accords.

Course contents

1. The system of risks in financial intermediation. Risk classification, with particular reference to credit risk. Risk management, capital, and the intermediaries' crisis.
   
2. Regulation and supervision of the financial system. Rationale, goals, models, and tools of regulation and supervision. The new architecture of supervision within the framework of the European Banking Union.
3. Supervision of financial intermediaries. Basel 2 and capital adequacy. The prudential control process: the ICAAP and SREP processes. Crisis management and guarantee systems.
4. Corporate governance and internal governance. Internal auditing, risk management, and compliance. The remuneration and incentive systems. Conflicts of interest in financial intermediation.
5. ESG and ICT risks.

Readings/Bibliography

Bank of Italy

http://www.bancaditalia.it/compiti/vigilanza/normativa/archivio-norme/circolari/c285/index.html

SSM

https://www.bankingsupervision.europa.eu/home/html/index.en.html

SREP

https://www.bankingsupervision.europa.eu/banking/srep/html/index.en.html

ECB

Guida sui rischi climatici e ambientali Aspettative di vigilanza in materia di gestione dei rischi e informativa, 2020

EBA

Guidelines on ICT Risk Assessment under the SREP, May 2017

Teaching methods

In-class lectures and discussion of case studies.

Assessment methods

The written exam is composed of "open-answer questions" on the topics taught during the course and lasts one hour. The questions aim to verify the knowledge and understanding of the theories taught during the course and their application to case studies.

Students must select two questions out of the four proposed and answer to all the corresponding sub-points. The answer to each question is worth 16 points, and the final mark is computed as the simple sum of the two marks obtained for each question.

To pass the exam, students must obtain a sufficient grade for both questions. The final mark is expressed out of 30 points according to the following graduation:

• <18, fail;
• 18-23, sufficient;
• 24-27, good;
• 28-30, very good;
• 30 with laude, excellent.

A positive final mark can only be refused once. Refusal of the grade has to be communicated via email within the day of the subsequent office hours of the instructor.

It is not possible to bring books, personal notes, or electronic devices to the exam. Registration for the exam is compulsory, and students have to register through AlmaEsami [https://almaesami.unibo.it/almaesami/welcome.htm] according to the general rules of the School of Economics and Management.

Teaching tools

Teaching material (slides and discussion of case studies).

The slides can be downloaded by clicking on "Teaching resources on Virtuale" or directly from the "Virtuale" website (https://virtuale.unibo.it).

Office hours

See the website of Paola Brighi