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Department of Financial and Management Studies (DeFiMS)

Banking and capital markets

Course Code:
15PFMC056
Unit value:
0.5
Taught in:
Term 2

The module is concerned with the structure and operation of financial intermediaries and capital markets. It is the aim of this course to provide students with a sound understanding of theoretical and applied issues in banking and capital markets. Upon the completion of the course, students will have an understanding of the relative merits of these two distinct financial institutions, of the sources of banking instability, and of the role of regulation.

Objectives and learning outcomes of the course

On successful completion of the course, students will be able to:

  • Understand the reasons for the existence of financial intermediaries
  • Understand how information imperfections shape the working of both markets and financial institutions
  • Analyse and assess policy and regulatory framework
  • Evaluate the impact of phenomena like credit bubbles, bank runs, credit rationing

Method of assessment

Assessment for this course is by one tutorial presentation at 10%; an essay of 4,000 words at 30%; an unseen written examination at 60% of the total grade; all elements except the presentation may be resubmitted

Suggested reading

Indicative Readings:

  • F. Allen and D. Gale , (2001). Comparing financial systems, MIT Press. Ch. 2 and 3.
  • X. Frexias and J.C. Rochet (1997) Microeconomics of Banking, MIT Press. Ch. 1,2.
  • D. Diamond and P. Dybvig. (1983) Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy 91, 401419.