Financial Markets, Banking and Regulation

• Credit value: 30 credits at Level 7
• Tutors: Dr Arup Daripa, Professor Sandeep Kapur, Professor Anne Sibert
• Assessment: up to five 2500-word take-home essays, plus in-class presentation, or a dissertation (100%)
  

In this module we use theoretical and historical approaches to explain why banks and financial markets are inherently vulnerable to crises and to analyse the role of policy and institutions.

Building on basic training in microeconomics, we introduce theoretical models where frictions such as asymmetric information and coordination failures create a role for intermediaries and produce problems such as bank runs, asset price bubbles and herding. We examine the role of monetary policy, bank supervision and regulation, corporate governance and ratings agencies in mitigating or exacerbating bad outcomes. We discuss policy proposals for dealing with financial crisis.

Indicative syllabus

• Overview: financial markets and institutions
• Central banks and the inflation bias
• Monetary policy in normal times and crises
• Asset price bubbles
• Microeconomics of regulation
• History of crises
• Private debt and crises
• Cost of regulation, shadow banking
• Moral hazard and adverse selection
• Banks, bank runs and policy responses
• Structured finance and hedge funds
• Remuneration in the financial sector
• Market freezes
• Sovereign debt crises
• Gender bias and cognitive errors