LA SALLE UNIVERSITY
Finance Department
The Financial Services Industry
Fin 306
Fall, 2002
Dr. K. Rhoda
College Hall 415C
Hours: Tues.,
Thurs., 11:00 – 2:00
Phone: 215-951-1033
E-Mail rhoda@lasalle.edu
Return to Fin 306
Course Overview and
Objectives
Financial
service providers such as banks, thrifts, insurance companies, investment
companies and pension funds have evolved, over the last 20 years into complex
organizations that are essential to the overall financial process of channeling
money from lenders to borrowers.
Understanding what these financial institutions do and how they make
decisions is crucial for anyone that must deal with them—from people that must
wisely manage their money to large multinational corporations that must make
profits in an uncertain world.
This course
is an examination of financial service organizations and the environment in
which they operate. Financial institutions
have a large impact on the flow of funds in financial markets and on interest
and exchange rates and the overall level of economic activity. In turn, they are greatly affected by what
happens in financial markets. The
overall goal is to give you an understanding of the financial system and how
financial service organizations operate in it.
Specifically,
after you complete this course, you should
1.
Have a thorough understanding of what the various
financial service organizations do and how they are managed.
2.
Have a thorough understanding of the financial system
(markets, instruments, government institutions, etc.) within which financial
service firms operate.
3.
Be able to analyze the dynamics of financial market
performance, such as interest and exchange rate movements and financial market
risk.
4.
Have an appreciation for the legal and ethical issues
associated with the management of financial service organizations and the
problems resulting from mismanaged institutions.
Prerequisites
Fin 201,
Fin 300
Text
Gardner, Mona, Mills, Dixie and
Elizabeth Cooperman. Managing Financial Institutions: An Asset/Liability Approach. (4th
Ed.). 2000
Course Procedures
In order to meet the goals of the course, we will have a combination
of assigned readings, lectures and class discussions, problems and a case
study. These are organized in four
Sections with the reading assignments listed on the last two pages of the
syllabus.
During the first two-thirds of the course we will examine several
types of financial institutions with respect to what they do and how they are
managed. The evolution of management
procedures in a changing regulatory and competitive environment will be
emphasized. This material is covered in
Sections I – III.
During the last third, we will talk about the general nature of the
financial system and the impact that it has on financial institution
management. This material is covered in
Section IV.
For both sets of material, class time will be devoted to lectures and
discussions of selected questions/problems related to the reading material.
To illustrate some of the issues facing modern financial institutions,
you will also analyze a case involving strategic decision-making for a large
financial services firm. At the
beginning of the semester, you will be assigned to a small base group. Each group will be responsible for preparing
a written analysis of the case to be handed in at the end of the semester. A detailed description of the case analysis
assignment as well as the case will be distributed after the groups are formed
(in 2 to 3 weeks).
In addition to your work with your
base groups, you will be asked to team up with other class members for the
purpose of discussing questions during class time. These questions will be drawn from the text and also from ongoing
events reported in the financial press (see next paragraph).
Finally, it should be assumed that you are keeping up-to-date on
business and financial developments by regularly reading the Wall Street Journal and/or other
business periodicals. This is
particularly important to do in this area of finance since things are changing
so rapidly. So that we can inform each
other of the ongoing events in the financial system, some class time will be
devoted each week to discussions of what has been happening in the past
week. These discussions will form the
basis for linking the course material to the actual operation of the financial
system. Participating in these
discussions is important for this reason and also because some exam questions
will draw from them.
There will be 3 in-class exams and a final exam. Each are indicated in the Reading Assignment
section that follows. Each in-class
exam will cover the material immediately preceding it. The final will mainly cover the last
section, but may also have one or two general questions drawing from your
experience in the whole course.
All exams must be taken when scheduled. Sufficient notice will be given for each test so there will be no
make-ups, except in cases of dire emergency.
Your course grade will be determined as follows:
Exams 60%
Final 25%
Team Assignments
and Class Discussions 15%
Course grades will be assigned on a +/- basis.
Reading Assignments
SECTION I:
Overview of Financial Service Organization Management (3 weeks)
1. Evolution of Financial Institutions
Chapter 1
2. Asset/Liability Management
Chapter 2
3. Regulation and
Capital Structure
Chapters 3, 4
Exam #1 on Section I
SECTION II:
Management
of Depository Institutions (4 weeks)
1. Performance, Profits and Risk
Chapters 5, 6
2. Innovations in Profitability
Management
Chapter 9
3. Domestic and International
Lending
Chapter 21
Exam #2 on Section II
SECTION III:
Management
of Nondepository Institutions (3 weeks)
1. Management Issues for Insurance
Companies
Chapter 10
2. Management Issues for Mutual
Funds and Pension Funds
Chapter 12
SECTION IV:
The Environment
for Financial Institution Management (4 weeks)
1. Interest Rates, Exchange Rates
and Asset Valuation
Chapter 14
2. The Term Structure of Interest
Rates
Chapter 15
3. Interest Rate Risk and
Immunization
Chapter 16
Case
Analyses Due
Final
Exam