Baruch College The City University of New York
17 Lexington Avenue
New York, New York 10010
Proposed New Course Description
Finance 4810
Banking Policy
Lower Capstone Course
Prerequisite: Finance 3810
Management of Financial Institutions
An interdisciplinary course concentrating on the problems that confront the chief administrative officers of a banking enterprise. The course stresses the overall company point of view in dealing with top management problems. Working in teams designed to represent the executive management of competing financial institutions, students are confronted with the tasks of analysis and decision--making in a global environment using a variety of case studies. An integral part of this course involves participation in a computerized bank management business game. Requirements include a written report and group presentation focusing on financial results, decision making dynamics, and ethical considerations.
3 hours; 3 credits
Proposal
Finance 4810:
Banking Policy
Lower Capstone Course
Summary of Objectives: Why Any Bank Simulation?
Success in today's highly competitive, global banking environment requires managers to fuse financial acumen with managerial, marketing, and technical abilities. The high degree of integration among the bank's various functions requires managers to adopt a comprehensive, integrated approach. If a manager's perspective is confined or circumscribed, there will be unforeseen implications of managerial decisions that will act to the detriment of even the most capable division head. Unfortunately, this unified approach to bank management is not developed in compartmentalized academic coursework. The bank management simulation is a useful vehicle for the instructor to integrate specific bank operations and activities into a unified approach to bank management. The simulation's specific objectives are:
1. To demonstrate the manner in which individual financial and managerial operating decisions interact with one another and with the economic environment so as to determine the bank's overall financial performance;
2. To require students to work in teams to establish overall financial performance objectives for realistically simulated banks and to develop specific policy initiatives to accomplish those goals;
3. To demonstrate the implications of managerial operating decisions in a dynamic and competitive environment;
4. To acquaint students with the techniques and methods of financial analysis of banking
firms so as to evaluate their banks' performance and revise their operating decisions;
5. To identify and implement tactics designed to achieve strategic goals in a structured environment where individual performance is judged according to the collective financial performance of the group.
The Stanford Bank Simulation: Why This Simulation?
Version X of the Stanford Bank Game
The Stanford Bank Game is a microcomputer program that realistically simulates the operation of a commercial bank based upon (1) financial decision inputs supplied by teams of student bank managers and (2) a set of economic and competitive conditions reflecting financial characteristics in the macroeconomic environment. The simulation requires teams to evaluate the financial position and competitive condition of their simulated bank at the beginning of the bank game and then:
1. Establish financial performance objectives for the bank;
2. Set managerial goals and objectives for the bank;
3. Execute operating decisions for the bank to achieve the desired objectives;
4. Analyze financial statements and evaluate the financial outcome of these operating
decisions.
5. Integrate marketing and human resource management strategies in order to attain financial objectives.
The bank game acquaints participants with the techniques and methods of financial analysis of banking firms and gives them the opportunity to apply them in a realistic setting. Teams are encouraged, at the outset of the game, to assign job titles to team members so as to delegate decision making authority and managerial responsibility. After each run of the simulation, all participants receive detailed financial reports of their bank's performance as well as selected data both on competing banks and on the overall state of the external economy. After each iteration of the bank game, the instructor will lead group and team discussions to evaluate performance and to point out the interrelationships between managerial decision making and bank financial performance.
The Stanford Bank Game is currently being used at over eighty colleges and universities in the U.S. Since 1964 countless major banking institutions have used the bank game in their in-house training programs. Version X of the simulation has been updated to incorporate new innovations in the field of banking such as off balance sheet activity, interest rate risk management, BIS capital regulations, and asset securitization. The goal is to provide participants with a hands on practical approach to bank managerial decision making.
Sample Syllabus
Week Number:
1: Introduction
* Determination of Long Term Bank Objectives and Strategy
* Evaluation of Bank Financial Performance
* Assignment of Teams
* Allocation of Job Titles Within Each Team
2: The Structure of the Banking Firm: Sources and Uses of Funds
* Forecasting Commercial Loan Demand
* Forecasting Deposit Flows
* Determination of Securities Holdings
* Forecasting Consumer Loan Demand
* Team Decision #1
3: Determinants of Bank Profitability: Net Interest Income
* Interest Income: Securities and Loans
* Interest Expense: Deposits and Purchased Liabilities
* Team Decision #2
4: Determinants of Bank Profitability: Non-Interest Income and Fees
* Fee Income
* Operating Expenses
* Team Decision #3
5: Interest Rate Risk Measurement and Management
* Gap Analysis
* Forecasting Interest Rates: Yield Curve Analysis
* Team Decision #4
6: Credit Risk Measurement and Management
* Analysis of Default Risk Exposure
* Credit Scoring Models
* Team Decision #5
7: Exchange Rate Risk Measurement and Management
* Currency Risk Measurement
* Sovereign Country Risk Exposure
* Team Decision #6
8: Liquidity Risk Measurement and Management
* Reserve Management
* "Hot Money" and the Cost of Purchased Liabilities
* Team Decision #7
9: Capital Structure
* BIS International Risk Adjusted Capital Regulations
* Bank Cost of Capital
* Team Decision #8
10: Hedging Using Futures and Forwards
* Management of the Bank's Gap Risk Exposure
* Simulated Financial Futures and Forwards Transactions
* Team Decision #9
11: Hedging Using Options
* Management of the Bank's Gap Risk Exposure
* Simulated Financial Options Transactions
* Team Decision #10
11: Hedging Using Swaps
* Management of the Bank's Gap Risk Exposure
* Simulated Swaps
* Team Decision #11
12: Managing the Off-Balance Sheet Position
* Off-Balance Sheet Book Consisting of:
Simulated Futures. Options, and Swaps
* Securitization and Loan Sales
* Team Decision #12
13: Strategic Management
* Marketing and Advertising to Promote Long Range Goals
* Human Resource Management
* Wrap Up of Commercial Bank Management Simulation