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Managing Financial Institutions

Managing Financial Institutions

The financial landscape has changed dramatically over the past year. Despite changes in ownership, organizational form, and an emerging (stringent) regulatory regime, the roles of Financial Service Firms (FSFs) remain unchanged. But the current crisis is partially attributable to the fact that many FSFs deviated from their true roles.

This course will deal with the roles of various kinds of FSFs and with the management challenges each type of firm (or decision of a larger financial conglomerate) faces. Of course, we will spend time discussing cause, consequences, and potential cures of the current crisis, but it is my hope that our key focus will be upon the “eternal verities”.

Management of Financial Institutions in intended not only for those interested in careers in FSF, but also for those who wish to extend their institutional, industry specific knowledge. This might aptly be described as a survey course, though we shall probe deeply in certain areas. We will cover banks, insurance companies, investment banks, hedge funds, mutual funds, and trading markets. Though the distinctions amongst these FSFs are blurring, there are still some distinctions. We will emphasize management issues such as risk management and regulatory compliance, but we will also touch upon some public policy concerns, for example TARP, the mortgage crisis and proposals for regulatory reform.

The course consists of a blend of lectures, case studies, and guest speakers.

You are expected to attend all classes, to have read assigned readings, to have prepared answers to the study questions, and to have prepared assigned cases.

During the term, there are four assigned case studies. Two will be eligible for individual write-up. Choose either the Banc One case or the Subprime Meltdown case to render a written analysis on your own. A third case study, HSBC, is a group project, and randomly selected groups will be given the opportunity to present their analyses to the class. The fourth case study will be used for class discussion and helps with an historical perspective.BR>
Though each case assignment lists questions to help you get a handle on key case issues, I do not necessarily want direct answers to these questions. I would like you to follow the following format:

Issue: Identify the chief decision (s) confronting management in the case. e.g. Should we concentrate all securities trading on one network?

Analysis: Discuss the pros and cons of alternative courses of action.

Recommendation: Indicate what management should do and why.
Individual case write-ups should be no longer than three double spaced pages, and they are due at the start of the class on the day which they are assigned. In addition, there will be two group projects. One is relatively modest, while the other may be a bit more demanding. A group consists of no fewer than three or more than six students. BR>

Group Project I: The HSBC case. The issue here is what should HSBC do about becoming a global bank? This combines financial and strategic issues. We shall set aside a class period during the term to allow randomly selected groups to make their presentations to peers. The paper should be no longer than four pages. Regarding the presentation, try to keep it to 15 minutes and no more than 7 to 10 power point slides. Note: if slides tell the whole story, there is no need for additional written material.

Group Project 2: This requires the group to pick a topic of interest to its members, research it, write about it, and report findings to the class. Pick any issue you wish that has to do with FSFs or markets. This could be a broad policy issue, e.g. what should the government do about mortgage markets. Or, it could be more managerially oriented, e.g. what would you recommend to the new management at Citigroup. The paper should be no more than 10 pages and presentation slides should number fifteen or fewer. I would be pleased to discuss appropriate topics with you. I would also like to have a short (one sentence or two) write-up about your topic and a list of team members by April 11th.

Text: F.S. Mishkin & S. G. Eakins, Financial Markets & Institutions, 6th edition. Pearson-Addison Wesley, 2009 (M&E)

This text will be on reserve at Feldberg or you can buy a copy. Roughly half of the book will be assigned. The other half is redundant to material you covered in first year required courses. However, this is a good book, and one of its co-authors, Mishkin, recently left the Board of Governors of the Fed., so much should be quite topical. Accordingly, there might be some insights in the text that will help you guess what the Fed will do.

I will also assign some chapters from a book on financial markets. This book will be on Reserve at Feldberg:

L. Harris, Trading & Exchange, Market Microstructure for Practioners, Oxford Univ. Press, 2003

Note: check course folder prior to each lecture for updated materials.

The individual case write-up must reflect individual work, that is no study group discussion. The group case should reflect work done by that group alone. The group research projects must reflect original work. The Tuck Honor Code applies.

Laptops may be used in class for note-taking purposes and presentation purposes only. Web-surfing, e-mailing, love notes are not allowed.

Individual Case Write-up 20%

Group Case Presentations 20%

Group Research Project 40%

Class Participation 20%