Finance and Banking in the European Union

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Course Information
International Business
Terms offered: 
Fall, Spring
Language of instruction: 

Previous course work in economics, finance or banking.


An analysis of international finance and bank management with particular emphasis on the structure and operation of banking systems and capital markets within the European Union. The course covers the instruments and methods of international financial intermediation, the European Monetary Union (EMU), the Euro, and the reforms in EU-associated East-Central Europe, with regard to their impact on banks, insurance companies and capital markets from the EU to the U.S.

Attendance policy: 
All IES courses require attendance and participation. Attendance is mandatory per IES policy. Any unexcused absence will incur a penalty of 3% on your final grade. Any student who has more than three (3) unexcused absences will receive an “F” as the final grade in the course. Absences due to sickness, religious observances, and family emergencies may be excusable at the discretion of the Center Director. In the case of an excused absence, it is the student’s responsibility to inform the Academic Dean of the absence with an Official Excused Absence Form, as well as any other relevant documentation (e.g. a doctor’s note), and to keep a record thereof. This form must be turned in as soon as possible before the class, in the case of a planned absence, or immediately after the class, in the case of an unplanned absence, in order for the absence to be considered excused. It is also the student’s responsibility to inform the professor of the missed class. Students can collect and submit the Official Excused Absence Form from the office of the Academic Dean.   TESTS MISSED DURING UNEXCUSED ABSENCES CANNOT BE MADE UP!
Learning outcomes: 
By the end of the course, students are able to:
  • Compare the function of different exchange rate systems
  • Evaluate risk management
  • Analyze the advantages and disadvantages of a common currency
  • Express the characteristics of corporate finance and corporate governance
  • Articulate the possibilities and limitations of central bank monetary policy to the benefit of a nation’s economy
Method of presentation: 

Discussion, case studies, lectures, and student presentations.

Required work and form of assessment: 
  • Class participation - 25%
  • Presentation - 10%
  • Midterm - 15%
  • Final exam - 30%
  • Term paper - 20%
  Term Paper & Presentation: Each student is assigned one presentation on either a case study or discussion topic. Presentations must be prepared with a handout. Each student is allowed ca. 10 minutes for presenting their topic. Term papers are 8 - 10 pages long papers based on the chosen topic for presentation in class. Together with the presentation, students turn in a short outline of the paper consisting of a thesis statement and at least three sources used for the presentation. The paper must meet the requirements as published in the writing guide published on the moodle page. Deadline for the papers vary based on the chosen topic. Each paper is due one week after the given presentation. In case of a field trip in between, the paper is due in the first session after the field trip.   Final Exam:
Written exam at the end of the semester. The instructor will provide detailed information  at the end of the term.   Emile Zola: Money:
This book is a reading assignment for the entire semester. At the end of the course each student is required to summarize the book in no more than half a page. Students should note the most important aspects of the book as they see it. This is the basis for the final discussion. Students must be prepared to present their view on the book.   Reading assignments:
Reading assignments to prepare class sessions will be posted on moodle.




Session 1

“Overture”: Finance and Banking in the European Union

  • Who is who?
  • Expectations
  • Introduction and Presentation of Learning Goals Required Reading, Timetable, Student Presentations

Required Readings

  • Specialist knowledge: Financial Markets and Institutions (Mishkin / Eakins)
  • Philosophical knowledge: Money, Emile Zola
  • General knowledge: Journal Articles (tbd)

Part 1: Money & Interest Rates

Session 2

Money and Interest Rates (I)

  • Function and Meaning of Money
  • History of Money
  • Money Theory
  • Philosophy
  • What do Interest Rates Mean and What is their Role in Valuation?

Required Readings:

  • Chapter 1 Page 41 - 53
  • Chapter 3 / Page 76 to 103

Required Presentations next Lectures:

  1. Present Value and Four Types of Credit Market Instruments
  2. Distinction between Real and Nominal Interest Rates
  3. Duration (Calculating and Interest Rate Risk)

Session 3

Money and Interest Rates (II)

  • Function and Meaning of Money
  • History of Money
  • Money Theory
  • Philosophy
  • What do Interest Rates Mean and What is their Role in Valuation?

Part 2: The Banking Industry

Session 4

Banks and Financial Institutions (I)

  • What is Banking?
  • Meaning and Importance of Banks and Banking Industry
  • Overview of Different Banks  (Universal/Commercial Banks vs. Investment/Specialized Banks, Glass-Steagall Act)

Required Readings:

  • Chapter 3 Page 76 - 103
  • Chapter 7 Page 174 - 201
  • Chapter 17 Page 438 – 464
  • Chapter 22 Page 583 – 607

Required Presentations next Lectures:

  1. The Bank Balance Sheet (439)
  2. Measuring Bank Performance (457)
  3. Investment Banks (583 – 607)
  4. Presentation: Glass-Steagall – Then, and now?
  5. Journal Articles: Why are Banks essential?
  6. Journal Articles: Goldman Sachs & Greece (Moral Aspects)
  7. Journal Articles: Hedge Funds (Masters of the Universe? J. Paulson/W. Ackman)

Session 5

Banks and Financial Institutions (II)

  • Financial Markets and Participants
  • In-depth Understanding of Commercial Banks
  • Investment Banks
  • Asset Management (Development in Europe, Business Models & their approach)

Part 3: Risk

Session 6

Banking Risks (I)

  • Theory of Risk
  • Overview
  • Operative and Strategic Risks (Functions and Types of Financial Risks, Measurement and Risk Identification)

Required Reading:

  • Chapter 23 Page 608 – 627
  • Chapter 24 Page 630ff (no quantitative!)

Required Presentations:

  1. Managing Credit Risk (609)
  2. Presentation: Findings of the Financial Crises Inquiry Com. (Congress 2011)
  3. Presentation: Rating – bane or boon?
  4. Journal Articles: Risk
  5. Journal Articles: Financial Market Crises

Session 7

Banking Risks (II)

  • Focus Banking Risks: Main Banking Risks and Effective Risk Management

Session 8

Banking Risks (III)

  • “How to deal with risk in relation to real money”
  • Asset Management Example
  • (Risk) Management of an Investment Fund

Session 9

Banking Risks (IV)

  • “The Financial Market Crises 2008”
  • Reasons, Interpretation of the Financial Crises 2007/2008

Part 4: Regulation

Session 10

Corporate Governance in the Euro area

  • Characteristics of Corporate Finance and Corporate Governance in the Euro area 
  • Compared to the US

Required Reading:

  • Chapter 18 Page 465 – 493

Required Presentations:

  1. Presentation: Basel I and II
  2. Presentation: Basel III
  3. Journal Articles: Regulation

Session 11

Midterm on Parts 1-3

Session 12

Ownership Structure and Investor Relations

  • Ownership Structure
  • Rating Agencies
  • Financial Transparency and Information
  • Disclosure (Accounting Practices, “Comply or Explain”)

Session 13

Banking Regulations

  • Banking Regulations until Financial Crisis and Thereafter (Basel II) for the Future
  • Comparison USA and EU

Part 5: The Euro and the EU

Session 14

The European Union 1945 to 2010 (Focus: Economy, Banking, and Finance)

  • History and Development from WW II to European Union (Founding European Economics)
  • Community, European Monetary Union) (International) Importance Now vs. Then.
  • The Creation of Monetary Zones and Optimal Currency Areas

Required Presentations:

  1. Presentation: The European Currency Crisis 2010/11– will the Euro survive?
  2. Presentation. The European stability and growth pact– a total disaster
  3. Journal Articles: EMU

Session 15

The European Monetary Union (EMU)

  • History - the Evolutionary Process - and Development, Importance and Outlook (From Bretton Woods to the EMU)
  • Coordination of European Monetary and Exchange Rate
  • Policies, Functions and Usage of the ECU

Session 16

The European Central Bank and Economic Policy

  • The Transition from the European Monetary Institute (EMI) to the European System of Central Banks (ESCB)
  • The Institutional Setting
  • Monetary Policy Instruments
  • The Stability and Growth Pact
  • US Fed vs. the Deutsche Bundesbank vs. the ECB

Session 17

Banking within the EU and the EMU

  • Implications of EMU on Banking and Financial Markets (Effects of EMU on the Banking Systems and Bank Consolidation. Banking Strategies after the Euro.)

Session 18

The Euro             

  • The Euro’s International Role and Implications on the US Dollar (The Euro as International Currency, Implications for International Financial Markets)
  • The Euro andCentral European Transition / Application Countries (EU Enlargement: Criteria, Candidates and Process)


Required readings: 
Frederic S. Mishkin / Stanley G. Eakins (Pearson) Financial Markets and Institutions
  • Chapter 1 Page 41 - 53
  • Chapter 3 / Page 76 to 103
  • Chapter 3 / Page 76 to 103
  • Chapter 7 Page 174 – 201
  • Chapter 17 Page 438 – 464
  • Chapter 22 Page 583 - 607
  • Chapter 23 Page 608 – 627
  • Chapter 24 Page 630ff (no quantitative!)
  • Chapter 18 Page 465 – 493
  Emile Zola (Mondial) Money (L’Argent) You should read (and enjoy the book),   Journal Articles
(Economist, Wall Street Journal, Financial Times etc)
  • Why are Banks essential?
  • Goldman Sachs & Greece (Moral Aspects)
  • Hedge Funds (Masters of the Universe? J. Paulson/W. Ackman)
  • Risk and Riskmanagement
  • Financial Market Crises 2008
  • Regulation (Initiatives since 2009)
  • EMU (The big picture)
Additional requirements: 

Research Sources:

  • Artis, Michael, Axel Weber, and Elizabeth Hennessy, eds. The Euro: A Challenge and Opportunity for Financial Markets. London/New York: Routledge/SUERF, 2000
  • Centre for Economic Policy Research discussion papers:
  • Deutsche Bank Research Enlargement Monitor: Reports:
  • European Central Bank: Monthly Bulletin, working papers and speeches:
  • European Investment Bank: Working Papers:
  • European Bank for Reconstruction and Development: Reports:
  • EU-Commission: Bulletins, reports, working papers:
  • European Financial Management:
  • IMF Publications:
  • Standard and Poors Rating Direct:
  • United Nations Economic Commission for Europe: