SN
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Chapters
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Text & Supplementary Readings
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Lecture Hours
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1.
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The Financial System
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3
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Financial Markets: Debt and equity markets, primary and secondary markets, exchange and over-the-counter markets, money and capital markets, spot and future markets; financial Institutions: depository and non-depository Institutions;
Financial Instruments: money market instruments and capital market instruments; financial intermediation: transaction cost and risk sharing; an overview of the Nepalese Financial System.
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Kohn, Ch. 2, 8, 18, 19 Financial Institution and Markets
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2.
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Fundamentals of Financial Markets
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3
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Interest rates: Concept, changes in interest rate levels, the term structure of interest rates, factors influencing interest rate levels, risk-free rate of return, nominal and real interest rate.
Exchange rates: bid and ask rates, bid-ask spread, spot and forward rates, discount and premiums;
Valuation: Time value of money, present value concept; discounting and compounding; bond and stock valuation, yield-to -maturity; bond pricing theorem, amortized loans.
Risk and return: Time value of money, present value concept; discounting and compounding; bond and stock valuation, yield-to -maturity; bond pricing theorem, amortized loans.
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Kohn, Ch. 4, 5, 6, 7 Financial Institution and Markets
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3.
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Commercial Banking
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1.5
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Basics of banking, the bank's balance sheet, assets, liabilities, off-balance sheet activities, bank's income statement, credit creation process,
General principles of banking management, international banking, the Nepalese banking system: structure, licensing, operations and exit policy.
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Kohn, Ch. 9, 10, 11 Financial Institution and Markets
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4
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Non-Banking Financial Institutions
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1.5
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Saving banks, credit unions, non-bank financial institutions in Nepal: development banks, finance companies, rural development banks including other micro-credit development banks, cooperatives, non-government organizations, other non-bank financial institutions (insurance companies, EPF, CICL, DICGC, CIT, NEPSE, postal saving units).
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Kohn, Ch. 12 Financial Institution and Markets
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5
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Insurance Companies, Pension Funds, and Mutual Funds
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1.5
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Insurance: the economics of insurance; pricing of premiums; marketing; incentive problems; types of insurance: life insurance, health insurance, property-liability insurance; reinsurance; and regulation of insurance.
Pension Funds: Issues in the provision of the retirement income; pension plans; types of plane; and regulation of pension plans.
Mutual Funds: understanding mutual funds; open-end and close-end mutual funds; net asset value (NAV); investment objective classes; and regulation of mutual funds.
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Kohn, Ch. 14 & 15 Financial Institution and Markets
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6
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Security Markets
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1.5
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Concept; price discovery; liquidity; transaction costs; structure of securities market; trade execution; stock market equilibrium, bond market, regulation of securities market in Nepal; the market for government securities in Nepal.
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Kohn, Ch. 16 & 17 Financial Institution and Markets
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7
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Payment Policy and Public Policy
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1.5
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Concept of payment system; payment instruments: cash and non-cash payment; clearing house; delivery versus payment; gross settlement system; net settlement system; risks in payment system; and efficiency and stability of the payment system.
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Kohn, Ch. 13 Financial Institution and Markets
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8
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Banking Regulation and Supervision
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3
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Conceptual framework; objectives; prudential regulation; regulatory and supervisory mechanism; Basel Core Principles for Effective Banking Supervision; Basel II New Capital Accord and its adoption in Nepalese context; regulation and supervision with special reference to Nepalese banking system.
Classification of Banks (BAFIA), CAMEL Rating, Capital Adequacy Ratio (CAR), Non-Performing Asset (NPA), Asset Management Company (AMC), Asset Liability Management Committee (ALCO), Stressing Test, Know Your Customer (KYC) etc.
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Kohn, Ch. 14 Financial Institution and Markets
NRB directives and circulars
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9
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Stability of Banking and Financial System
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3
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Liquidity crises, bank runs and panics, crashes in securities market, why do liquidity crisis occur, factors affecting stability, fragmentation and interdependence, an overview of central bank’s functions and special emphasis on regulation and supervision of the financial system, lender of the last resort, government guarantees, solution for market crashes, deposit insurance and moral hazard problem.
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Kohn, Ch. 3 Financial Institution and Markets
NRB directives and circulars
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10
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Money and the Central Banking
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3
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The functions of money; alternative definition of money: base money, narrow money and broad money; the demand for and supply of money; the money supply process, money multiplier; monetary policy: instruments, targets, ultimate goals or objectives and the Nepalese context.
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Kohn, Ch. 18 Financial Institution and Markets
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11
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The Derivative Markets
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1.5
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Hedging; forward; futures; options; swaps; and pricing of derivative securities.
Risk – Market risk, operational risk, credit risk etc.
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Kohn, Ch. 21 Financial Institution and Markets
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Total Lecture Hours
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24
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