Bank Regulation and Resolution of Banking Crises

Welcome to this module, Bank Regulation and Resolution of Banking Crises. The module has been designed to introduce you to some of the key concepts, principles and practices in modern banking regulation and the resolution of modern banking crises. The literature on these subjects is vast so, in approaching the material, we will focus on a selection of key issues of relevance to the topic.

Learning outcomes

By the end of this module you will be able to:

• explain what is the target and what are the working mechanics of microprudential and macroprudential regulation of banks and other financial intermediaries
• evaluate the purpose and the effects of capital adequacy regulations and their evolution
• contrast crisis prevention measures, such as deposit insurance and Lender of Last Resort, with resolution procedures, such as bail-out and bail-in, especially for globally-operating institutions
• explain how and to which extent shadow banking and offshore financial centres change or outright prevent the working of banking regulation
• evaluate open questions and unresolved issues in international regulation and supervision after the 2008 Financial Crisis.

Tuition and assessment

Students are individually assigned an academic tutor for the duration of the module, with whom you can discuss academic queries at regular intervals during the study session.

You are required to complete two Assignments for this module, which will be marked by your tutor. Assignments are each worth 15% of your total mark. You will be expected to submit your first assignment by the Tuesday of Week 6, and the second assignment at the end of the module, on the Tuesday after Week 10. Assignments are submitted and feedback given online. In addition, queries and problems can be answered through the Virtual Learning Environment.

You will also sit a three-hour examination on a specified date in September/October, worth 70% of your total mark. An up-to-date timetable of examinations is published on the website in July each year.

Study resources

• Study guide: The module study guide is carefully structured to provide the main teaching, defining and exploring the main concepts and issues, locating these within current debate and introducing and linking the assigned readings.
• Reports and textbooks: Allen N Berger, Philip Molyneux & John OS Wilson (2014) The Oxford Handbook of Banking. 2nd Edition, Oxford UK: Oxford University Press.
• Readings:Throughout the module you will be directed to study a selection of readings, including journal articles, book extracts and case studies that are of particular relevance and interest to the topics covered in the module.
• Virtual learning environment: You will have access to the VLE, a web-accessed study centre. Via the VLE, you can communicate with your assigned academic tutor, administrators and other students on the module using discussion forums. The VLE also provides access to the module Study Guide and assignments, as well as a selection of electronic journals available on the University of London Online Library.

Study calendar 2022/23

Study calendars are subject to change.

Module overview

Unit 1 Elements and Objectives of Bank Regulation

• 1.1 Introduction
• 1.2 Bank Failures and Banking Crises
• 1.3 Is Bank Regulation Different from Regulating Non-Financial Firms?
• 1.4 Prudential Regulation for a Basic Bank
• 1.5 What is the Purpose of Prudential Regulation?
• 1.6 From the Simple Basic Model toward Actual, Complex Banks
• 1.7 The Global Financial Crisis and what regulators are left to do
• 1.8 Conclusion

Unit 2 International Rules for Prudential Regulation

• 2.1 Introduction – Evolution of Coordinated International Rules
• 2.2 Basel I
• 2.3 Basel II
• 2.4 Basel III
• 2.6 How do changes in regulation generate costs and benefits to the economy?
• 2.7 Conclusion

Unit 3 Financial Stability, Bank Structure and Shadow Banking

• 3.1 Introduction
• 3.2 Commercial Banking and Investment Banking – Joined or Separate?
• 3.3 Shadow Banking – Good for the Banking System or Too Shadowy?
• 3.4 Conclusion

Unit 4 Macroprudential Regulation and Policy

• 4.1 Introduction: Motivation for Macroprudential Regulation (Macropru)
• 4.2 Macroprudential Policies: Why and How
• 4.3 Interactions with Other Policies and International Dimensions
• 4.4 Does it work? Empirical Studies of Macroprudential Policies
• 4.5 Conclusion

Unit 5 Deposit insurance and Lender of Last Resort – Before and After the 2008 Crisis

• 5.1 Introduction
• 5.2 Deposit Insurance
• 5.3 LOLR – Its Origins and Classic Character
• 5.4 The 2008 Crisis and New Role for Central Banks Operating as LOLR
• 5.5 LOLR as the New Monetary Policy
• 5.6 Conclusion

Unit 6 Dealing with Bank Failure: 'Too Big to Fail' and New Resolution Regimes Contents

• 6.1 Introduction
• 6.2 What is Special about the Insolvency of Banks?
• 6.3‘ Too Big to Fail’ and G-SIBs'
• 6.4 Lessons of the 2008 Crisis: The Birth of Bail-in
• 6.5 Conclusion: Bank Resolution, Lessons from the Financial Crisis

Unit 7 The Institutional Structure of Financial Regulation Contents

• 7.1 Introduction
• 7.2 Approaches to Institutional Structure for Financial Regulation
• 7.3 Why is Regulatory Structure Important?
• 7.4 Recent Trends in Regulatory Structure
• 7.5 Regulatory Structure and the Role of the Central Bank
• 7.6 The Fully Unified Approach to Financial Sector Supervision
• 7.7 Two Contrasting Models of Financial Regulation
• 7.8 The UK's Financial Services Authority – Lessons from the 2008 Financial Crisis
• 7.9 Conclusion

Unit 8 Issues in International Supervision and Regulation Contents

• 8.1 Offshore Financial Centres
• 8.2 Regulation, International Institutions, Standards and Codes
• 8.3 On the Political Economy and Ethics of Banking Regulation
• 8.4 Conclusion

Module samples

• M456 Module Introduction (PDF)
• M456 Specimen Examination (PDF)
• M456 Unit 1 (PDF)

Disclaimer

Important notice regarding changes to programmes and modules