Banking and financial markets encompass the ‘ecosystem’ that (a) channelizes money from those who have it (i.e. savers/investors) to those who need it (i.e. borrowers) and (b) facilitates cross-border flow of funds through exchange of currencies. The ecosystem of banks and financial markets (including Central Banks) has deepened in size, sophistication and complexity over the years. However, in recent times they have also been the subject of abuse, failures and economic distress in several countries resulting in a ‘contagion’ that has concurrently affected several countries around the world!
More recently, and perhaps more importantly, thanks to the liberalization of most economies, the world has witnessed an exponential increase in the free flow of capital across countries. Banking institutions and financial markets, being the predominant conduit for such free flow of capital across countries, have therefore become even more "globally interconnected." Such a globally interconnected financial system, combined with regulatory systems that are country-specific and hence varying considerably in rigor and implementation, has further compounded the risks and the consequent contagion, as witnessed in the global financial meltdown that was triggered in 2008.
This course on ‘Banking and Financial Markets’ comprises two parts:
In an earlier course, which was introductory in nature, we had looked at the theory and concepts underlying banking and financial markets, the products and instruments offered and the associated market mechanisms.
In this more advance course, we will look at Banking and Financial Markets from a Risk Management Perspective:
The embedded risks in any financial system: credit risk, interest rate risk, foreign exchange risk, operational risk, off-balance sheet risk, etc.
The contagion effect of these risks, as witnessed in the 2008 global financial meltdown
How are these risks identified, measured and managed, using several risk mitigation techniques and sound regulatory oversight.