Year
2024Credit points
10Campus offering
Prerequisites
BAFN200 Principles of Finance
Incompatible
BAFN205 - Financial Instruments and Institutions
Teaching organisation
150 hours over a twelve-week semester or equivalent study period
Unit rationale, description and aim
This unit is the foundation for understanding the role of financial institutions in the financial system. Students need to understand the concepts of financial risks (e.g., interest rate risk, market risk and credit risk), non-financial risks (e.g., operational risk, environment, social and governance (ESG) risk), management, asset-liability management of financial institutions, management of loan portfolio, interest rate risk, capital adequacy and standards, and financial inclusion to maximise access to financial services, including those who are vulnerable and marginalised. Students need to compare and contrast the role of banks and non-banking financial institutions in the financial system. Students will further develop skills in managing financial institutions. Students will be able to apply asset-liability management techniques to generate the capital plans of financial institutions to withstand during crisis and non-crisis periods.
Learning outcomes
To successfully complete this unit you will be able to demonstrate you have achieved the learning outcomes (LO) detailed in the below table.
Each outcome is informed by a number of graduate capabilities (GC) to ensure your work in this, and every unit, is part of a larger goal of graduating from ACU with the attributes of insight, empathy, imagination and impact.
Explore the graduate capabilities.
| Learning Outcome Number | Learning Outcome Description | Relevant Graduate Capabilities |
|---|---|---|
| LO1 | Describe how financial institutions apply asset, liability and capital management techniques to manage cost structures and strategies whilst contributing to financial inclusion | GC1, GC2, GC3, GC6 |
| LO2 | Measure and analyse financial risks (e.g., interest rate risk, market risk and credit risk), non-financial risks (e.g., operational risk, environment, social and governance (ESG) risk) | GC1, GC2, GC3 |
| LO3 | Analyse the size, structure and composition of local and international financial markets and institutions and the role of financial markets | GC1, GC2, GC3 |
| LO4 | Evaluate the RBA’s, ASIC’s, The Treasury’s and APRA’s policies in relation to the regulation of Australian financial institutions | GC1, GC2, GC3 |
| LO5 | Generate capital adequacy plans for financial institutions by working collaboratively | GC1, GC2, GC3, GC4, GC6 |
Content
Topics will include:
- Australian financial institutions
- Australian payments system
- interest rate determination
- the term structure of interest rates
- interest rate risk
- market risk
- credit risk
- operational risk
- ESG risk
- RBA, APRA and ASIC regulatory requirements for financial institutions
- capital standards: Basel II and Basel III
- financial inclusion: Preferential option for the poor and vulnerable (e.g., SDG 1. No Poverty, SDG 8. Economic growth and decent employment for all)
Learning and teaching strategy and rationale
ACU’s teaching policy focuses on learning outcomes for students. Our teaching aims to engage students as active participants in the learning process while acknowledging that all learning must involve a complex interplay of active and receptive processes, constructing meaning for oneself, and learning from others. ACU promotes and facilitates learning that is autonomous and self-motivated, is characterised by the individual taking satisfaction in the mastering of content and skills and is critical, looking beneath the surface level of information for the meaning and significance of what is being studied.
The schedule of the workshop is designed in such a way that students can achieve intended learning outcomes sequentially. Teaching and learning activities will apply the experiential learning model, which encourages students to apply higher-order thinking. The unit ensures that learning activities involve real-world scenarios that assist with ‘real-world’ preparedness. The unit also uses a scaffolding technique that builds a student’s skills and prepares them for the next learning process phase.
This unit is structured with required upfront preparation before workshops, and most students report that they spend an average of one hour preparing before the workshop and one or more hours after the workshop practicing and revising what was covered. The online learning platforms used in this unit provide multiple forms of preparatory and practice opportunities for you to prepare and revise. It is up to individual students to ensure that the out of the class study is adequate for the optimal learning outcomes and successes.
Mode of delivery: This unit is offered in different modes. These are: “Attendance” mode, “Multi” mode and “Online” mode. This unit is offered in three modes to cater to the learning needs and preferences of a range of participants and maximise effective participation for isolated and/or marginalised groups.
Attendance Mode
In a weekly attendance mode, students will require face-to-face attendance in specific physical location/s. Students will have face-to-face interactions with lecturer(s) to further their achievement of the learning outcomes. The online learning platforms used in this unit provide multiple forms of preparatory and practice opportunities for you to prepare and revise.
Multi-Mode
In a multi-mode, students will require intermittent face-to-face attendance determined by the School. Students will have face-to-face interactions with lecturer(s) to further their achievement of the learning outcomes. This unit is structured with required upfront preparation before workshops. The online learning platforms used in this unit provide multiple forms of preparatory and practice opportunities for you to prepare and revise.
Online Mode
In an Online mode, students are given the opportunity to attend facilitated synchronous online seminar classes with other students and participate in the construction and synthesis of knowledge, while developing their knowledge. Students are required to participate in a series of online interactive workshops which include activities, knowledge checks, discussion and interactive sessions. This approach allows flexibility for students and facilitates learning and participation for students with a preference for virtual learning.
Assessment strategy and rationale
Assessments are used primarily to foster learning. ACU adopts a constructivist approach to learning that seeks alignment between the fundamental purpose of each unit, the learning outcomes, teaching and learning strategy, assessment and the learning environment. In order to pass this unit, students are required to achieve an overall score of at least 50% and attempt all assessment items. Using constructive alignment, the assessment tasks are designed for students to demonstrate their achievement of each learning outcome.
Overview of assessments
Attendance
| Brief Description of Kind and Purpose of Assessment Tasks | Weighting | Learning Outcomes |
|---|---|---|
Assessment Task 1: Critical appraisal This task requires students to analyse and evaluate the asset and liability management (ALM) of a bank. This assessment task helps students learn industry best practices to evaluate the ALM of a bank using real-life data. Submission Type: Individual Assessment Method: Critical appraisal Artefact: Written response | 30% | LO1, LO2 |
Assessment Task 2: Simulations This task requires students to work in groups to develop and simulate a capital plan of a financial institution. Submission Type: Group Assessment Method: Simulations Artefact: Simulations | 30% | LO5 |
Assessment Task 3: Alternative Assessment (embedding SDG-based activities) The final assessment comprises a set of tasks based on real-life cases on financial inclusion (SDG 1 and SDG 8), the term structure of interest rates, financial risks, ESG risk and the capital adequacy of banks. Submission Type: Individual Assessment Method: Written Response Artefact: Written Response | 40% | LO1, LO2, LO3, LO4 |
Multi Mode
| Brief Description of Kind and Purpose of Assessment Tasks | Weighting | Learning Outcomes |
|---|---|---|
Assessment Task 1: Critical appraisal This task requires students to analyse and evaluate the asset and liability management (ALM) of a bank. This assessment task helps students learn industry best practices to evaluate the ALM of a bank using real-life data. Submission Type: Individual Assessment Method: Critical appraisal Artefact: Written response | 30% | LO1, LO2 |
Assessment Task 2: Simulations This task requires students to work in groups to develop and simulate a capital plan of a financial institution. Submission Type: Group Assessment Method: Simulations Artefact: Simulations | 30% | LO5 |
Assessment Task 3: Alternative Assessment (embedding SDG-based activities) The final assessment comprises a set of tasks based on real-life cases on financial inclusion (SDG 1 and SDG 8), the term structure of interest rates, financial risks, ESG risk and the capital adequacy of banks. Submission Type: Individual Assessment Method: Written Response Artefact: Written Response | 40% | LO1, LO2, LO3, LO4 |
Online mode
| Brief Description of Kind and Purpose of Assessment Tasks | Weighting | Learning Outcomes |
|---|---|---|
Assessment Task 1: Critical appraisal This task requires students to analyse and evaluate the asset and liability management (ALM) of a bank. This assessment task helps students learn industry best practices to evaluate the ALM of a bank using real-life data. Submission Type: Individual Assessment Method: Critical appraisal Artefact: Written response | 30% | LO1, LO2 |
Assessment Task 2: Simulations This task requires students to work in groups to develop and simulate a capital plan of a financial institution. Submission Type: Group Assessment Method: Simulations Artefact: Simulations | 30% | LO5 |
Assessment Task 3: Alternative Assessment (embedding SDG-based activities) The final assessment comprises a set of tasks based on real-life cases on financial inclusion (SDG 1 and SDG 8), the term structure of interest rates, financial risks, ESG risk and the capital adequacy of banks. Submission Type: Individual Assessment Method: Written Response Artefact: Written Response | 40% | LO1, LO2, LO3, LO4 |
Representative texts and references
ANDRLE, M., BRADA, J. C., TOMŠÍK, V. & VLČEK, J. 2019. Banks' Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe. Eastern European economics, 57, 50-69.
CHAMPAGNE, C., COGGINS, F. & SODJAHIN, A. 2021. Can extra-financial ratings serve as an indicator of ESG risk? Global Finance Journal, 100638.
CORELLI, A. 2019. Understanding financial risk management, Bingley, England, Bingley, England: Emerald Publishing.
CORNELL, B. 2021. ESG preferences, risk and return. European financial management: the journal of the European Financial Management Association, 27, 12-19.
CUMMINGS, J. R. & GUO, Y. 2020. Do the Basel III capital reforms reduce the implicit subsidy of systemically important banks? Australian evidence. Pacific-Basin finance journal, 59, 101247.
LIU, G. & MOLISE, T. 2019. Housing and credit market shocks: Exploring the role of rule-based Basel III counter-cyclical capital requirements. Economic modelling, 82, 264-279.
Madura, J. 2018., Financial markets and institutions, 12th edn, Mason, Ohio. South-Western Cengage Learning.
Saunders, A. et al. 2020., Financial institutions management: a risk management approach, 10th edn, New York. McGraw-Hill.
Viney, C. & Phillips, P.J. 2019., Financial institutions, instruments & markets, 9th edn, McGraw Hill Australia, North Ryde, NSW. (ISBN: 9781760422943).