COURSE OUTLINE

COURSE PURPOSE

This course provides an introduction to the management of financial institutions and intermediaries. The course focuses on the importance of ensuring good organizational functioning within institutions to manage the varied types of risk that they may be exposed to. The course examines the principles of the theory and practice of effective organizational structure and policies for successful risk management and how to manage the interrelationships that are inherent between departments. Students are also introduced to international standards of banking practice and how they impact the functioning of the institutions plus how to define and measure various types of risk these institutions can be exposed to.

EXPECTED LEARNING OUTCOMES

At the end of the course the students should be able to:

• Explain the nature, role, functioning and supervision of financial institutions

• Identify, measure and manage risk in a financial institution

• Explain credit risk, interest rate risk, and Market risk.
• Analyze capital adequacy regimes and other operational requirements for banks and other financial institutions

COURSE OUTLINE

LESSON ONE

OVERVIEW OF FINANCIAL INSTITUTIONS

1.0: INTRODUCTION

1.1: LEARNING OBJECTIVES

1.2: DEFINING FINANCIAL INSTITUTIONS

1.3: CLASSIFICATION OF FINANCIAL INSTITUTIONS

1.4: SPECIALNESS OF FINANCIAL INSTITUTIONS

1.5: ACTIVITY

1.6: SUMMARY

1.7: FURTHER READING

1.8: SELF TEST QUESTIONS

LESSON TWO

MANAGEMENT OF COMMERCIAL BANKS

2.0: INTRODUCTION

2.1: LEARNING OBJECTIVES

2.2: FUNCTIONS OF COMMERCIAL BANKS

2.2.1: PRIMARY FUNCTIONS

2.2.2: SECONDARY FUNCTIONS

2.3: REGULATION OF COMMERCIAL BANKS

2.3.1: Objectives of bank regulation

2.3.2: Forms of regulation

2.4: CAMELS RATING SYSTEM

2.5: ACTIVITY

2.6: SUMMARY

2.7: FURTHER READING

2.8: SELF TEST QUESTIONS

LESSON THREE

MANAGEMENT OF OTHER FINANCIAL INSTITUTIONS 3.0: INTRODUCTION

3.1: LEARNING OBJECTIVES

3.2: MANAGEMENT OF PENSION FUNDS

3.3: REVIEW OF THE PENSION SYSTEM IN KENYA

3.3.1: THE MANDATORY SCHEME FOR FORMAL SECTOR EMPLOYEES – THE NSSF

3.3.2: THE PENSION SCHEME FOR PUBLIC SERVICE EMPLOYEES AND ARMED FORCES

3.3.3: VOLUNTARY OCCUPATIONAL SCHEMES

3.3.4: INDIVIDUAL PERSONAL PENSION PLANS

3.4: REGULATORY FRAMEWORK IN KENYA

3.4.1: Role and effectiveness of the regulatory authority – the RBA

3.5: ASSESSING THE PERFORMANCE OF PENSION FUNDS

3.6: MANAGING INSURANCE COMPANIES

3.6.1: Risks faced by insurance companies

3.6.2: Regulation of insurance companies

3.6.3: CARAMELS analytical framework for insurance companies

3.7: MANAGING INVESTMENT BANKS

3.8: ACTIVITY

3.9: SUMMARY

3.10: FURTHER READING

3.11: SELF TEST QUESTIONS

LESSON FOUR

MEASURING THE RISK EXPOSURE

4.0: INTRODUCTION

4.1: LEARNING OBJECTIVES

4.2: TYPES OF FINANCIAL RISKS FACED BY FINANCIAL INSTITUTIONS

4.2.1: LIQUIDITY RISK

4.2.2: INTEREST RATE RISK

4.2.3: CREDIT RISK

4.2.4: OPERATIONAL RISK

4.2.5: MARKET RISK

4.2.6: STRATEGIC RISK

4.2.7: REPUTATIONAL RISK

4.3: ACTIVITY

4.4: SUMMARY

4.5: FURTHER READING

4.6: SELF TEST QUESTIONS

LESSON FIVE

MANAGING RISKS

5.0: INTRODUCTION

5.1: LEARNING OBJECTIVES

5.2: LIQUIDITY MANAGEMENT POLICY

5.3: CAPITAL ADEQUACY

5.4: SECURITISATION

5.5: ACTIVITY

5.6: SUMMARY

5.7: FURTHER READING

5.8: SELF TEST QUESTIONS

LESSON SIX

GLOBAL RISK BASED MODELS

6.0: INTRODUCTION

6.1: LEARNING OBJECTIVES

6.2: BASEL PRINCIPLES

6.2.1: Basel I

6.2.2: BASEL II

6.2.3: BASEL III

6.3: VALUE AT RISK (VAR)

6.4: ACTIVITY

6.5: SUMMARY

6.6: FURTHER READING

6.7: SELF TEST QUESTIONS

Course Textbook

Lange, H., A. Saunders, M.M. Cornett (LSC), ―Financial Institutions Management‖, Third Edition, McGraw-Hill/Irwin,(2012)

OTHER REFERENCES

• Crouhy, M., D. Galai and R. Mark., ―The Essentials of Risk Management‖ McGraw Hill (2006)

• Peter, R.S and Sylvia H; Management and Financial Services. 9^TH Edition, McGraw-Hill Irwin, (2012)

• John H, J. Options, Futures and Other Derivatives; Pearson Prentice Hall (2006)

• Relevant Acts of Parliament

• Internet