BEAM065 Bank Management

Coursework 1 (40% of the mark for this module) Submission

Word limit: 2,000.

This assignment consists of two options.

YOU NEED TO CHOOSE ONE OPTION ONLY (Option 1 or Option 2).

Option 1 (100 marks) - From Compustat (available through WRDS) or Orbis, download relevant data for at least 50 banks (depository institutions),from any country of your choice. Run at least 6 different regression models to examine how the banks’ ROA might be affected by:

a)  Credit risk

In particular, you could examine:

-    The impact of non-performing loans

-    The impact of loan-loss provisions

b) Lending policies

In particular, you could examine:

-    The impact of lending growth

-    The impact of the business model (e.g., different categories of loans)

c) Size

-    Usually, the literature considers the natural logarithm of total assets (or market capitalisation, for listed banks) as a proxy

d) Capital structure

In particular, you could examine:

-    The impact of Tier 1 ratio

-    The impact of the equity multiplier

You should consider the relevant literature to justify your choice of proxy for each variable in your methodology discussion. You can use whatever econometric specification you deem appropriate. You can also add further control variables.

Then, discuss whether your results are consistent with your expectations (by comparing them with the relevant literature), and what might be driving any unexpected result.

IMPORTANT: For your analysis, you MUST use STATA. The reference list,

tables (including notes and titles of the tables) and figures (including notes and titles of the tables) do NOT count towards the word limit. You do NOT need an introduction or conclusion in your report, but you can divide your report into three different sections, one to describe briefly your methodology and data (e.g, database used and sample selection), and one for the discussion of the results.

Suggested structure for the report:

1.1 Methodology

1.2 Data

1.3 Discussion of the results

Option 2 (100 marks) - Answer two of the following four questions:

a)  What are the potential consequences of interest rates near or below zero in terms of:

• Bank performance

• Bank risk-taking

• Bank lending

(50 marks) (max 1,000 words)

b) How can we estimate the potential impact of a new regulation on bank shareholders, before it is actually implemented? Provide some examples of recent academic papers that have attempted to do this, and briefly describe their findings.

(50 marks) (max 1,000 words)

c)  Describe how competition in banking markets might affect:

•   Access to bank funding, and related cost, for SMEs (small-medium enterprises)

• Economic growth (especially at the local/regional level)

(50 marks) (max 1,000 words)

d) Describe how capital requirements might affect:

• Bank performance

• Bank credit risk

(50 marks) (max 1,000 words)

You may (but do not have to) support your analysis with quantitative examples and statistical analysis.

IMPORTANT: The reference list does NOT count towards the word limit. You do NOT need an introduction or conclusion in your essay.

Further guidelines

This assignment requires you to focus on the concepts and theories developed in weeks 1 to 10, and is related to the ILOs 1-3, and 5-10. You are expected to read all of the relevant core academic material on ELE. Evidence of reading optional articles will be rewarded if it improves the quality of your answers. The marking criteria are stated in Appendix A below.

IMPORTANT: Academic misconduct

The material you submit must be your own work and written in your own words. Where you have used quoted material, you must make full reference to it.

You might be asked to send the data used in your analysis to the Module Leader (Dr.

Thaer Alhalabi), along with any other file that you might have used for your data analysis

(e.g., Excel file, STATA do-file or log file). Dr. Thaer Alhalabi might also ask you to explain how

you ran the regressions, either via email or during an online meeting on Teams. Further

investigation of potential academic misconduct might ensue, according to University regulations.

More information on referencing style

https://vle.exeter.ac.uk/course/view.php?id=6748&section=2

Late Submission of Assignments

You must submit your assignment by the deadline specified. If you fail to submit on time, the following penalties apply:

• Work submitted up to 1 hour after the deadline, which has reached the standard of the

module pass mark or above, will be subject to a penalty of 5% of the total available mark for the coursework, down to a minimum score of the module pass mark.

•     The penalty for assessed work submitted up to two weeks and without an agreed extension is a capped mark of 50%.

•     Assessed work submitted more than two weeks beyond a submission date will receive a mark of zero.