COURSE INFORMATION Course Title: BANK MANAGEMENT

Code	Course Type	Regular Semester	Theory	Practice	Lab	Credits	ECTS
BAF 432	B	2	3	0	0	3	7.5

Academic staff member responsible for the design of the course syllabus (name, surname, academic title/scientific degree, email address and signature)	NA
Main Course Lecturer (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	Dr. Juliana Imeraj jimeraj@epoka.edu.al , Wednesday 18:00 - 20:45
Second Course Lecturer(s) (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	NA
Teaching Assistant(s) and Office Hours:	NA
Language:	English
Compulsory/Elective:	Compulsory
Study program: (the study for which this course is offered)	Master of Science in Banking and Finance
Classroom and Meeting Time:
Code of Ethics:	Code of Ethics of EPOKA University Regulation of EPOKA University "On Student Discipline"
Attendance Requirement:
Course Description:	Corporate finance and microeconomics are applied to matters of importance to commercial bankers. Among the subjects treated are bank asset portfolio construction, lending policies, liabilities management, bank capital structure, short run cash management, financial market rates and flows, and quantitative models for bank management. Commercial bank management is analyzed from an internal viewpoint in terms of what bank managers should look for in asset management and why; what market conditions they should be aware of; and what techniques they can use to meet changing economic and financial conditions.
Course Objectives:	The objectives of this course are to: provide students with an introduction to the financial management of the commercial banking enterprise, equip students with an understanding of the basic issues involved in value creation and risk management for banking firms, and equip students with the technical and analytical tools, and strategic abilities necessary to understand the evolution and workings of the commercial banking industry.

BASIC CONCEPTS OF THE COURSE

1	Commercial banks
2	Risk management
3	Financial Statements
4	Financial Analysis
5	Regulatory capital
6	Profitability ratios
7	Liquidity ratios
8	GAP analysis
9	DURGAP analysis

COURSE OUTLINE

Week	Topics
1	Review of Syllabus: Introduction to the Course, Banking and the Financial Services. This chapter provides background information related to bank management, the regulatory environment, current banking trends and competition from other financial institutions. Initially, it provides a critique of the multitude of factors influencing the financial crisis of 2008–2010. It examines the organizational structure of small banks and large bank holding companies.It explains different channels for offering banking services. It describes the current regulatory environment and explains the supervision and examination performed by the Central Bank (i.e CAMELS). (Materials by lecturer; Ch. 1 & 2, p.1- Timothy W. Koch & S.Scott MacDonald. “Bank Management”, Bank of Albania supervisory regulations).
2	Bank Financial Statements (part I). Like other financial intermediaries, commercial banks facilitate the flow of funds from surplus spending units (savers) to deficit spending units (borrowers). This week, we discuss Commercial Banks Financial Statements, Balance Sheet and Income Statement;explain Bank Assets, Bank liabilities, Stockholders equity and items in Income Statement.A bank’s balance sheet presents financial information comparing what a bank owns with what it owes and the ownership interest of stockholders. (Materials by lecturer; Ch.3, p.69 Timothy W. Koch & S.Scott MacDonald. “Bank Management”, Annual reports of banks operating in Albania)
3	Bank Financial Statements (part II). This week, we discuss items in Income Statement and Off-Balance sheet items for Commercial Banks. Interest and non-interest income and expenses are explained in detail. The recent financial crisis demonstrated that off-balance sheet items can hugely contribute to the failure of Commercial Banks and therefore different types of these items are discussed. (Materials by lecturer; Ch. 3 & 4, p.82, pg.159, Timothy W. Koch & S.Scott MacDonald. “Bank Management”. Annual reports of banks operating in Albania)
4	Analyzing Bank Performance (part I). Financial Statements alone do not provide adequate information therefore financial analysis is explained this week. Horizontal and vertical analysis of the Balance sheet and Income Statement is discussed in detail in order to draw conclusions about the main developments in the Commercial banks’ activity. We also discuss the causes of depository institution failures, when managers find their banks in trouble, what strategies can they pursue to improve performance and ensure survival? These questions became increasingly important during the 2008–2009 period as financial companies’ earnings declined with the increase in the number of nonperforming loans and problematic mortgages. (Materials by lecturer; Ch. 3, p.90, Timothy W. Koch & S.Scott MacDonald. “Bank Management”.
5	Analyzing Bank Performance (part II). This week we present the traditional DuPont model for evaluating bank performance using financial ratios to analyze the strengths and weaknesses of bank performance over time and versus peer institutions. Also, decomposing aggregate profitability ratios into their components to help identify key factors that influence performance, with the focus on risk management for credit risk, liquidity risk, market risk, operational risk, reputational risk, legal risk, and capital or solvency risk, to demonstrate the trade-off between risks and returns. (Materials by lecturer; Ch. 3, p.90, Timothy W. Koch & S.Scott MacDonald. “Bank Management”
6	Managing Interest Rate Risk: GAP and Earnings Sensitivity. Interest rate risk is a key component of a bank’s sensitivity to market risk (S), which is a component of a bank’s CAMELS rating. This chapter introduces GAP analysis and the use of earnings sensitivity analysis to assess the potential impact of interest rate and balance sheet changes on net interest income. The traditional static GAP model while simplistic, provides an easy way to understand the basic sources of risk and approaches for measuring and managing risk. The overall framework provides a methodology for analyzing the range of potential outcomes from interest rate changes, shifts in balance sheet composition, and the exercise of embedded options. (Materials by lecturer; Ch. 7, p.241, Timothy W. Koch & S.Scott MacDonald. “Bank Management”; Annual reports of banks operating in Albania )
7	Managing Interest Rate Risk: Economic Value of Equity. This chapter describes duration gap (DGAP) analysis and the use of sensitivity analysis to assess the potential impact of interest rate and balance sheet changes on the economic value of stockholders’ equity. DGAP analysis considers a bank’s entire balance sheet and calculates the weighted average duration of all assets and all liabilities. The difference in these weighted durations adjusted for financial leverage is labeled duration gap, which provides a measure of how the market value of stockholders’ equity will change when interest rates change. The chapter also examines the specific assumptions managers make when they try to actively manage a bank’s interest rate risk exposure. (Materials by lecturer; Ch. 8, p.283, Timothy W. Koch & S.Scott MacDonald. “Bank Management”
8	Midterm. Midterm Exam includes all the chapters covered until the 8th week and represents 40% of the overall grade.
9	Funding the Bank. This chapter focuses on the different types of funding sources available to banks and the relationship between funding sources and liquidity risks. It initially examines the nature of liquidity needs and the risk-return characteristics of alternative funding sources. It then explores the costs of various sources of funds, as well as the relationship between financing events and a bank’s liquidity, credit, and interest rate risk position. (Materials by lecturer; Ch. 10, p.365, Timothy W. Koch & S.Scott MacDonald. “Bank Management”.
10	Managing Liquidity. This chapter focuses on the management of liquidity risk at financial institutions. It introduces different types of cash and liquid assets, briefly outlines their characteristics, and then explores the reasons why depository institutions hold each type and how the magnitudes of each can be minimized. Liquidity planning is an ongoing part of a good asset and liability management strategy.Monthly liquidity gaps are analyzed as measures of liquidity risk throughout the next year. (Materials by lecturer; Ch. 11, p.413, Timothy W. Koch & S.Scott MacDonald. “Bank Management”.
11	The Effective Use of Capital. Capital plays a significant role in the risk-return trade-off at banks. Increasing capital reduces risk by cushioning the volatility of earnings, restricting growth opportunities,and lowering the probability of bank failure.This chapter examines the role that capital serves at banks, how regulators determinea bank’s capital adequacy, what constitutes bank capital, and strategies that banks canfollow to meet their growth and performance objectives. (Materials by lecturer; Ch. 12, p.449, Timothy W. Koch & S.Scott MacDonald. “Bank Management”.
12	Review and practical session
13	Presentation of Projects + Discussions. Analysis of Financial Statements of Banks operating in Albania. Financial and risk analysis.
14	Presentation of Projects + Discussions. Analysis of Financial Statements of Banks operating in Albania. Financial and risk analysis.

Prerequisite(s):	N/A
Textbook(s):	Timothy W. Koch, S. Scott MacDonald, “Bank Management”, 8th edition
Additional Literature:	Ppt-s prepared by lecturer and reading list distributed in class. Regulations by Bank of Albania. Annual Reports of Commercial Banks. Peter S. Rose, Sylvia Hudgins, “Bank Management and Financial Services”, 9th edition
Laboratory Work:
Computer Usage:
Others:	No

COURSE LEARNING OUTCOMES

1	Identifying the distinguishing features of banks as financial intermediaries, their unique characteristics as businesses in our economy;
2	Identifying and understanding the sources of risk in banking and how these risks interact to understand the overall risk level that banks face in today’s economic, financial, and regulatory environment;
3	Understanding how banks manage their risk exposure and the relationship of risk management to the creation of value for the bank;
4	Understanding how the economic and regulatory environments of the banks impact banks’ decision-making;
5	Developing technical, analytical and decision making skills in order to help understand managerial responsibility in the financial management of the banking firm; and finally,
6	Providing students with a foundation for more advanced academic and professional training and development in bank management.

COURSE CONTRIBUTION TO... PROGRAM COMPETENCIES (Blank : no contribution, 1: least contribution ... 5: highest contribution)

No	Program Competencies	Cont.
Master of Science in Banking and Finance Program
1	The students gain the ability to look at the problems of daily life from a broader perspective with an increased awareness of the importance of moral/ethical considerations and professional integrity in the workplace.	5
2	They develop a broader understanding of banking and finance including concepts, theories, and analytical tools that serve both in national and international markets.	5
3	They are able to apply advanced valuation models to estimate the price of different financial assets as well as evaluate multinational business firms.	5
4	They are able to apply different investment techniques and form portfolios that would generate higher returns by decreasing the unsystematic risk level.	4
5	They have advanced knowledge of the regulatory framework and functioning of the banking system, international banking, central banking and the conduct of monetary policy.	4
6	They are able to conduct advanced financial analysis and use the results in the decision-making process of business firms.	3
7	They are able to understand and use advanced economic theories and tools to solve economic problems in banking and financial services industry.	4
8	They have the ability to utilize accounting, financial and economic data as well as other information to solve complex and unstructured business problems by using advanced econometric and statistical models.	5
9	They develop their ability to think critically, do advanced and independent research, analyze, interpret results, draw conclusions, and communicate effectively, both individually and as part of a team.	5
10	They are provided with opportunities to acquire the necessary skills and competencies to move on to further study within the discipline.	5

COURSE EVALUATION METHOD

Method	Quantity	Percentage
Homework	5	2
Midterm Exam(s)	1	40
Project	1	40
Attendance		10
	Total Percent:	100%

ECTS (ALLOCATED BASED ON STUDENT WORKLOAD)

Activities	Quantity	Duration(Hours)	Total Workload(Hours)
Course Duration (Including the exam week: 16x Total course hours)	16	3	48
Hours for off-the-classroom study (Pre-study, practice)	16	3	48
Mid-terms	1	35	35
Assignments	3	12	36
Final examination			0
Other	1	20.5	20.5
Total Work Load:			187.5
Total Work Load/25(h):			7.5
ECTS Credit of the Course:			7.5

CONCLUDING REMARKS BY THE COURSE LECTURER

Overall the course was positively received by students.