M.Sc. International Banking & Finance and M.Sc. Financial Technology

2020/2021 AG922 Financial Management for Banks

Assignment1

Submission Deadline: 12.00pm Friday 19th March 20212 Lecturer: Livia Pancotto ([email protected])

ANSWER ALL QUESTIONS

Given the inherently risky nature of banking activity, bank capital represents a fundamental buffer to cover unexpected losses and to prevent failures which could have highly detrimental impacts on the real economy. In order to protect savings and to maintain public confidence in the functioning of the overall financial system, banks worldwide are subject to intense regulation and supervision. In this context, the main aim of the Basel Committee on Banking Supervision (BCBS), established in 1974, is to enhance global financial stability by strengthening the prudential regulation and supervision of banks. The Committee has over time published a series of international standards, mostly related to bank capital regulation, widely known as Basel Accords.

In the light of recent global developments, such as the coronavirus (Covid-19) pandemic, and by providing pertinent examples, your task is to:

1. Critically discuss the role and importance of bank capital and the rationale for holding and maintaining adequate capital levels.

(50 Marks) 2. While providing evidence of the latest developments in international bank capital regulation, critically

discuss the implications, benefits and shortcomings of the Basel III agreement. (50 Marks)

[TOTAL 100 MARKS] Important elements in a successful assignment on this topic:

§ Literature review based on highly-recognized academic journals. You should demonstrate your capability in reading and research beyond the material provided and discussed in lectures. A minimum of eight references from high-quality academic journals is expected (refer to the “How to read an academic article” file on MyPlace to understand how to evaluate the quality of an academic article). In addition, referring to respected financial media (e.g. The Economist, Financial Times) and international news agencies (e.g. Reuters, Bloomberg) is also relevant to build a critical and up-to-date review of the recent developments.

§ Graphs, data and tables will positively contribute to presenting your critical review (the maximum number of graphs/tables/figures is four).

1 This assignment will account for 30% of the final mark for this class. 2 The University late penalty scheme will be applied: https://www.strath.ac.uk/media/ps/cs/gmap/academicaffairs/policies/Policy_and_Procedure_for_the_Late_Submission_of_Coursework.pdf.p agespeed.ce.dLHAxb3k-D.pdf

The essay should include adequate in-text citations of papers and various sources of information, with full details reported in a list of references at the end of your document (organised alphabetically). The reference list should not be included in the word count. Word limit: 2,000 +/- 10% (approx. 6 pages A4, 1.5 line spacing, 12 point font). You must state the word count on the cover page of your work. Electronic submission through MyPlace. Late penalty for assignments

§ Coursework submitted after the deadline, student has an approved extension and submits within the approved extension period.

§ Late submission on the day of the deadline (or approved extended deadline), student has communicated exceptional circumstances and is granted a grace period of up until four hours after the deadline.

§ 1 calendar day (less than 24 hours) late: deduct 10 percentage points § 2 calendar days (more than 24 less than 48 hours) late: deduct 15 percentage points § 3 calendar days (more than 48 less than 72 hours) late: deduct 20 percentage points § 4 calendar days (more than 72 less than 96 hours) late: deduct 25 percentage points § 5 calendar days (more than 96 less than 120 hours) late: deduct 30 percentage points § 6 calendar days (more than 120 less than 144 hours) late: deduct 35 percentage points § 7 calendar days (more than 144 less than 168 hours) late: deduct 40 percentage points § After 7 full calendar days: a mark of zero will be applied

Late assignments will be marked on their academic merit, however, should a late penalty drop a mark below the pass mark of 50% then the mark awarded will be the pass mark of 50%. Please note, this applies only to weekdays where students submit in hard copy, but includes Saturdays and Sundays where students submit electronically. If the academic quality of the work submitted is below the pass mark, then no penalty will be applied with the emphasis on supporting students if any resubmission is required.

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