Financial Markets and Institutions

Course Description

Financial markets and institutions channel trillions of dollars through the global economy, affecting business and consumer decisions and the economic well-being of foreign countries. The purpose of this course is to guide students in developing critical thinking skills as applied to financial markets and institutions. Topics include the financial system in perspective; financial assets, money, and financial transactions; financial institutions in the financial system; interest rates in the financial system, interest rates in the financial system, financial markets in the financial system, the regulation of financial markets and institutions, and overview of Ethiopian financial system.

 

Course Objectives & Competences to be Acquired

This course provides students with the essential knowledge required to understand the nature and role of the financial system in the economy and the characteristics and operations of the major financial institutions.

WEEKS

Course Contents

Reading

2WEEKs

{1ST – 2ND}

1. An Overview of the Financial System.

1.1. The role of the financial system in the economy

1.2. Financial assets: role and properties

1.3.  Money (Meaning, Evolution, classification, characteristics of good money, function, and defect)

1.4.  Block Chain Technologies, Cryptocurrencies

1.5. Financial markets: role, classifications and participants

1.6. Lending and borrowing in the financial system

 

3WEEKs

{3RD - 5TH}

2.       Financial Institutions in the Financial System

2.1.      Financial institutions and capital transfer

2.2.      Functions of Financial Institutions

2.3.      Historical background of banking

2.4.      Depository financial institutions.

2.5.      Non-depository institutions.

2.6.      Central/National Banking

2.7.      International banking  

2.8.      E-banking, Digital Finance, and FinTech Disruption

2.9.      Risks in Financial Industry

 

 

3.       Islamic Banking: Sources and Uses of Funds

3.1.              Sources of Funds.

3.2.              Applications of Funds

3.3.              Financing Structures

 

 

4.       Banking And the Management of Financial Institutions

4.1.  The Bank statement of financial position

4.2.   General Principles of Bank Management

4.3.  Liquidity Management and the Role of Reserves

4.4.    Asset Management

4.5.              Liability Management

4.6.              Capital Adequacy Management

4.7.              Strategies for Managing Bank Capital

 

2WEEKs

{6TH - 7TH}

5.       Interest rates in the Financial System

5.1.         Types of Interest Rates

5.2.         The theory and structure of interest rates

5.3. Factors affecting the structure of interest rate determinations

5.4.         Estimating Nominal interest rate

 

3WEEKs

{8TH - 10TH}

6.       Financial Markets in The Financial System

6.1.         Organization and Structure of Markets

6.2.         Primary and secondary market

6.3.         Money Market

6.4.         Capital Market

6.4.1.      Debt Market

6.4.2.      Equity Market

6.5.         Foreign Exchange Markets

6.6.         The Derivative Market

 

2WEEKs

{11TH - 12TH}

7.       The Regulation of Financial Markets and Institutions

7.1.         Purpose of regulation

7.2.          Nature and Forms of Financial System Regulation

7.3.          Arguments regarding regulation

 

2WEEKs

{13TH - 14TH}

8.       Lending Operation and Portfolio Management               

8.1.              Type and nature of Banks Credit Facilities         

8.2.              Risk Associating with Lending              

8.3.              Loan Policy

8.3.1.         Loan Policy Topics          

8.3.2.         Loan Approval Process   

8.4.              Loan Portfolio Management  

8.4.1.          Oversight          

8.4.2.          Objectives         

8.4.3.         Strategic Planning            

8.4.4.         Portfolio Risk and Rewards           

8.4.5.          Portfolio Segmentation and Risk Diversification

8.5.              Non-Performing Loan (NPLs)

8.6.              Loan Audit 

8.7.              Internal control practice of loan

 

 

9.                       Overview Of Ethiopian Financial System

9.1.         Financial Institutions in Ethiopia

9.2.         Financial Markets in Ethiopia

9.3.          Regulation of financial sector in Ethiopia

9.4.               Ethiopian commodity exchange market and its operation

 

 

10.    The Banking Business and Other Activities

10.1.           Introduction              

10.2.           The Banking Business             

10.2.1.      Definition of Banking Business     

10.2.2.       Chief Characteristics of Banking Business  

10.2.3.       Requirements for the definition of a customer          

10.2.4.      Relationship between a Banker and customer

10.3.           General Relationship between a banker and customer        

10.4.           Obligations of a Banker          

10.5.           Right of the Banker  

10.6.           Duties of a customer

10.7.           Closure of an Account by a Customer  

10.8.           Closure of Account by Bank

10.9.           Inter-Bank and Inter-Branch Relationship          

 

Teaching & Learning Methods/Strategy

The teaching and learning methodology includes lecturing, discussions, problem-solving, and analysis. Take-home assignments will be given at the end of each chapter for submission within a week. Solutions to the assignments will be given once assignments are collected. Cases with local relevance will also be given for each chapter for a group of students to present in a classroom. The full and active participation of students is highly encouraged.

Assessment/Evaluation

The evaluation scheme will be as follows: 

 

Test 1

Test 2

Quiz1

Assignment 1

Final

Total

15%

15%

5%

15%

50%

100%

 

 

Workload in hours

Hours Required

Total Hrs

ECTS

Lectures

Lab

Assessments

Tutorials

Self-Studies

Assignment

Advising

32

 -

10

12

27

 -

- 

81

3

Roles of the Instructor

He/she will come to the class regularly on time and deliver the lecture in a well-organized manner. Besides, at the end of each class, he/she gives a reading assignment for the next class. He/she will make sure that proper assessments is given. He/she is also responsible for giving feedback for each assessment.

Roles of the students

The success of this course depends on the student’s individual and collective contribution to the class discussions. Students are expected to participate voluntarily or will be called upon, to contribute to set exercises and problems. Students are also expected to read the assigned readings and prepare the cases before each class so that they can contribute effectively to class discussions. Students must attempt assignments by their own. Proficiency in this course comes from individual knowledge and understanding. Copying the works of others is considered a serious offense and leads to disciplinary actions.

Text and reference books

Text Book:

· Fabozzi, Frank J, Franco Modigliani, Frank J. Jones. Financial Institutions and Markets. 3rd Edition, USA

Reference Books

·   Proclamations, Regulations, and Directives which govern the financial sector

·  Saunders, Anthony and Marcia Millon Cornett. Financial markets and institutions

·  Rose, Peter S. Money and capital markets: The financial system in an increasingly global economy. 5th Ed

· F. S. Mishkin and S. G. Eakins, Financial Markets and Institutions, Pearson Education, 6th edition, 2009.

·  M. R. Baye and D. W. Jansen, Money, Banking and Financial Markets, AITBS, 1996

· Rakesh Mohan, Growth with Financial Stability-Central Banking in an Emerging Market, Oxford University Press, 2011.

·L. M. Bhole and J. Mahukud, Financial Institutions and Markets,Tata McGraw Hill, 5th edition, 2011.