I hear and I forget. I see and I remember. I do and I understand.

Confucius (Chinese sage of 551-479 BC)

TEXAS A&M INTERNATIONAL UNIVERSITY

A.R. SANCHEZ, Jr. SCHOOL OF BUSINESS
Division of International Business and Finance Studies

COURSE SYLLABUS
FALL 2015

Course: FIN 4370, Commercial Bank Management

Time: Online
Room: Not Applicable
Instructor: Anand Jha
Office Hours: WHTC 217B, Tuesday and Thursday, 1:30 p.m. 3:30 p.m.
E-mail: ajha@tamiu.edu
Phone: 956-326-2581
Required Text: Title: Bank Management & Financial Services
Edition: 9th
Author: Peter S. Rose and Sylvia C. Hudgins
ISBN: 978-0-07-803467-1

Recommended: The Wall Street Journal, Business Week, Economists, among others. All
are available at the Killam Library.
Websites and additional online publications and resources will also be
used throughout the semester.

Prerequisite: ECO 3310 - Money and Banking, FIN 3310 - Introduction to Finance. A
minimum grade of D is required in these courses.

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Course Description:
This course explores various bank management techniques required to manage a modern
commercial bank in a rapidly changing environment. Topics include balance sheet management
(liquidity, liability, capital adequacy, spread management, and investment management), bank
profitability, and bank market structure and the regulatory environment.

Course Objectives and Assessments:

Course Objectives Assessments
You should identify the various risks that a bank Discussion Board Posts, Exam I, II, III &
manager would have to deal with. You should also Final Exam
know the causes of such risks, and know how to
manage (reduce) them.
You should explain why there is tension between Discussion Board Posts, Exam I, II, III &
the government regulator and the manager of a Final Exam
bank. And also explain the regulators objective
and perspective.
You should explain why and how the banking Discussion Board Posts, Exam I, II, III &
industry is different than other industries. Final Exam

You should explain why managers sometimes take Discussion Board Posts, Exam I, II, III &
excessive risk. Final Exam

Learning Approach:

This is an online course. My responsibilities as an educator are to set the direction of the
course, to provide resource materials and lay a foundation for understanding, to facilitate a
positive learning climate, and to hold students accountable for their learning. I expect you to
read the text carefully and solve the problems that are assigned for the class and remain
engaged. You need to participate in all discussion questions in a timely manner. Your writing
will be graded on analytical thoroughness, application of class material, integration of relevant
sources, theories, and findings, and relevance of answers to the questions posed. In other
words, rambling, disconnected opinions and vague references to sources will not be sufficient.

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Grading Policy
90- 100% A
80- 90% B
70- 80% C
60- 70% D
below 60 not passing

The overall score for the class will be calculated based on 4 Exams.

Exam I 25%
Exam II 25%
Exam III 25%
Class Discussions 25%

Exams
The dates of the Exam are mentioned in the following few pages. You can only take the
exam on the scheduled dates. I usually give two days in which you can complete the
exam. I reserve the right to not allow you take the exam if you cannot take it on time. If
there is a conflict with something important you will need to notify me at least 2 weeks
in advance.

Class Discussion
Students will be required to engage in on-line discussions with fellow students and the
instructor through discussion board posts. Students are required to post their response
to the discussion question for each class. Type your responses in the text box provided.
Do not submit as an attachment. The Discussion Board is supposed to simulate class
discussion. The instructor will also be joining the discussion posts, to expand the
discussion, thus you are required to monitor the posts.

Suggested Homework
Solving the problems assigned is central to learning in this course. The solutions to the
homework problems will be provided. These homework assignments are not graded;
however, the exam questions will be similar to homework problems.

Late Discussion Post

I will not accept late discussion posts. They are due on Sundays at 11:59 p.m. You will be unable to
post after the deadline.

Late Exam Policy:

If you fail to take the exam on the time it is due, I may allow you take the exam based on the reason
for failure to take the exam. But regardless, I will take off 20 points for being one day late. After 2

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days, 30 points, and after 3 days 40 points and so on.

Student Responsibility for Dropping a Course:

It is the student's responsibility to drop the course before the drop-date. The faculty is not
responsible for dropping students who suspend class attendance.

Instructor Communication:
My physical office hours are: Wednesday, 1:30 p.m. 5:00 p.m.
I will respond to emails within a 24-hour period, and assignments will be provided with
feedback (grades or comments) within a week. You can also arrange to talk to me over the
phone, if office hours dont suit your timings. I will log on to chat at 1:30 p.m. on Wednesday, if
no one shows up for next 10 minutes, I will log off.

Academic Services and Resources

All TAMIU Academic Services and Resources used to provide you with the tools to be a
successful student are available for you in ANGEL. When you log on to the course, click on the
Learner Support tab. Then click on the link of the service or resource you are interested in
contacting or accessing.

Technology Requirements:
This course is taught entirely online. Everything you need for the course is self-contained on the
BLACKBOARD course management system. All file types will open inside of the BLACKBOARD
system (Adobe Presenter, PDF, Microsoft Word, Microsoft PowerPoint, URLs, and video clips).
You can check your computer to make sure that all of the plugins are installed by clicking on the
Test Your Browser link in the Browser Test Module of the My Institution Tab. If you are missing
software, then go to the Student Support Tab and click on the Software Resources link to find
links to any of the missing software. If your home computer cannot access these files because it
is outdated and you cannot use TAMIUs computer labs, you need to drop the class and take it
during the normal semester. If you experience any problems with BLACKBOARD you need to
contact the OIT Help Desk (hotline@tamiu.edu or 956-326-2310), not the instructor.

Response Time
Since all assignments are submitted electronically, I will email you when I receive your
assignments. If you do not receive confirmation, I did not receive it. I will be monitoring the
class constantly, but I cannot be on-line 24 hours a day, so do not expect an immediate
response. (I will respond after 24 hours) I will print en-masse all assignments on Monday morning.
However, between the drop box and the e-mail copy, I do not anticipate any technology issues.
You can minimize the risk by not waiting until the last minute to submit assignments.

Course Format:
Under the Content Link (located on the left side of the course menu) you will find the course
material divided by week. Please take a moment to familiarize yourself with the setup. Each
folder contains Voice-Over Power Point Lectures; Turn it in Drop Box; Assigned Readings;

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Additional Resources; Discussion Post instructions; Writing Assignment instructions; and other
course materials. Lectures either expand upon or supplement the material presented in the
book. I will be monitoring the course to participate in discussion posts, answer questions, and
acknowledge receipt of assignments. All assignments will be submitted to the appropriate
TurnItIn Drop Box (unless otherwise specified). Assignment grades should be available within
a few days and will be posted on the MyGrades link (located on the left side of the course
menu). It is your responsibility to monitor your progress in the class via the MyGrade link on
BLACKBOARD and be cognizant of the class announcements.

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 Class Schedule and Readings
Week 1: August 19 August 23

Chapter 1: An Overview Of The Changing Financial-Services Sector

Goal of This Chapter: In this chapter you will learn about the many roles financial service-
providers play in the economy today. You will examine how and why the banking industry and
the financial services marketplace as a whole is rapidly changing, becoming new and different
as we move forward into the future. You will also learn about new and old services offered to
the public.

Objectives:
Explain the lender, depositor model of banks.
Why do we need the banking industry?
Why are they essential for prosperity?
What are some of the key services they provide?
What is the borrowing and lending model of banks?
What are some of the key trends in US banking industry? Why did they occur? What is
their implication?
What is the difference between convergence and consolidation?

Assignments

Read the Chapter

Do the following Problems 3, 5, 6

Answer these discussion questions:

1. Explain the difference between consolidation and convergence. Are these

trends in banking and financial services related? Do they influence each
other? How?

2. What do you think the financial-services industry will look like 20 years from
now? What are the implications of your projections for its management
today?

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 Week 2: August 24- August 30
&
Week 3: August 31- September 06
Chapter 2: The Impact Of Government Policy And Regulation On The Financial-Services
Industry

Goal of This Chapter: This chapter is devoted to a study of the complex regulatory environment
that governments around the world have created for banks and other financial-service firms in
an effort to safeguard the publics savings, bring stability to the financial system, and prevent
abuse of financial-service customers.

Objectives:

Why are politician interested in controlling banks?

Why are banks so heavily regulated?
What does a social planner want to achieve with the banking industry?
Explain the principal reasons why banks are regulated?
How much regulation is good regulation?
Explain some of the theories about impact of regulation by Joseph Stigler, Samuel
Peltzman, and Edward Kane.
Explain the impact of some of the major Acts: Glass Stegall Act of 1933, Riegle Neal
Interstate Banking 1994, and Gramm-Leach-Billey Act of 1999.
Describe the purpose of FDIC, and its implication to the manager of a commercial bank,
and the society at large.

Assignments

Read the Chapter

Do the following Problems 1, 2

Answer these discussion questions:

1. What does a social planner want to achieve with the banking industry?

2. Explain the theories about impact of regulation by Joseph Stigler, Samuel

Peltzman, and Edward Kane.

3. What is the Glass-Steagall Act, and why was it important in banking history?

4. What is the principal job performed by the FDIC?

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 Week4: September 7- September 13
&
Week5: September 14- September 20

Chapter 3: The Organization And Structure Of Banking And The Financial-Services Industry

Goal of This Chapter: The goal of this chapter is to explore the different types of organizations
used in the banking and financial services industry, to see how changing public mobility and
changing demand for financial services, the rise of potent competition, and changing
government roles have changed the structure, size, and the types of organizations in this
industry.

Objectives
How are small banks different from large banks? Who has advantage doing what?
Explain how economies of scale and economies of scope play a role in the banking
industry.
What is a bank holding company? What are the advantages/disadvantages of having
one?
What is the agency theory? How does it apply to banks?
What are agency costs? How can it be minimized?
Give some example of perverse incentives in the banking industry.
Why did banks take excessive risk?

Assignments

Read the Chapter

Do the following Problems 3,5

Answer these discussion questions:

1. What relationship appears to exist between bank size, efficiency, and

operating costs per unit of service produced and delivered? How about
among nonbank financial-service providers?

2. What did the Riegle-Neal Interstate Banking Act do? Why was it passed into
law?

3. Can you see any advantages to allowing interstate banking? What about
potential disadvantages?

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 Week 6: September 21- September 27
Review for Exam 1

Complete EXAM 1 by 11:59 p.m. on September 27. The exam will open at 12:01 a.m.
September 23.

Exam 1 will consists of multiple choice questions, and essay questions.

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 Week 7: September 28- October 04
Chapter 5: The Financial Statements Of Banks And Their Principal Competitors
Goal of This Chapter: The purpose of this chapter is to acquaint the reader with the content,
structure and purpose of bank financial statements and to help managers understand how
information from bank financial statements can be used as tools to reveal how well their banks
are performing.

Objectives

What is the importance of a financial statement?

What are the assets and liabilities of a bank?
Explain the difference between the income statement and balance sheet.
Develop the ability to calculate the key indicators using the balance sheet and income
statement: ROE, ROA, Net interest margin, Net non-interest margin, Net operating
margin, Earnings Per share. Explain what they mean and why we care about these
ratios.
Compare key ratios of different sized banks

Assignments

Read the Chapter

Do the following Problems 1, 2, 3, 4, 6

Answer these discussion questions:

1. Why are bank accounting practices under attack right now? In what ways
could financial institutions improve their accounting methods?

2. What are off-balance-sheet items and why are they important to some
financial firms?

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 Week 8: October 05- October 11

CHAPTER 6: MEASURING AND EVALUATING THE PERFORMANCE OF BANKS AND THEIR

PRINCIPAL COMPETITORS

Goal of This Chapter: The purpose of this chapter is to discover what analytical tools can be
applied to a banks financial statements so that management and the public can identify the
most critical problems inside each bank and develop ways to deal with those problems.
Objectives
You need to Explain exactly what the financial ratio calculated in Chapter 5 means.
How can you measure which bank is operating more efficiently?
Explain the equation: Return on Equity (ROE) =Net Profit Margin (NPM) * Asset
Utilization (AU) * Equity Multiplier (EM).
And then you should be able to analyze the bank based on these indicators.
Explain that trying to make more profit may also mean taking greater risk.
Develop the ability to measure key risks that banks take. For example, credit risk,
liquidity risk, price risk, interest rate risk, and foreign exchange risks.
What are off balance sheet items? Can they influence the risk of the firm?
What would be some of overall risk measures of a bank?

Assignments

Read the Chapter

Do the following Problems 4,5,6

Answer these discussion questions:

1. Why do the managers of financial firms often pay close attention today to the
net interest margin and noninterest margin? To the earnings spread?

2. What factors influence the stock price of a financial-service corporation?

3. What items on a bank's balance sheet and income statement can be used to
measure its risk exposure? To what other financial institutions do these risk
measures seem to apply?

Week 9: October 12- October 18

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 &
Week 10: October 19- October 25

Chapter 7: Risk Management For Changing Interest Rates: Asset-Liability Management And
Duration Techniques

Goals of This Chapter: The purpose of this chapter is to explore the options bankers have today
for dealing with riskespecially the risk of loss due to changing interest ratesand to see how a
banks management can coordinate the management of its assets with the management of its
liabilities in order to achieve the institutions goals.
Objectives:
What is interest rate? And, why do they change? Why are bank managers concerned
about interest rate fluctuations?
Explain how fluctuation in interest rates can affect assets can affect the value of assets
and liability of a bank.
How would it affect the net worth of the bank?
Why is it important to match interest rate sensitive assets with interest rate sensitive
liability?
What is GAP management? You should be able to articulate this very well.
Is it possible to measure how sensitive a bond is to interest rate? How can we calculate
it? What is it called?
Be able to calculate the duration of a bond. And use it to measure the effect of interest
rate fluctuation on the price of the bond.

Assignments

Read the Chapter

Do the following Problems: 11,12,13,14,15

Answer these discussion questions

1. Can you explain the concept of gap management?

2. When is a financial firm asset sensitive? Liability sensitive?

3. Commerce National Bank reports interest-sensitive assets of $870 million

and
interest-sensitive liabilities of $625 million during the coming month. Is the
bank asset sensitive or liability sensitive? What is likely to happen to the
banks net interest margin if interest rates rise? If they fall?

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 Week 11: October 26- November 1
Review for Exam 2

Complete Exam 2 by 11:59 p.m. on October 29. The exam will open at 12:01 a.m.
October 23.

Exam 2 will consists of multiple choice questions, and essay questions.

Week 12: November 2- November 8

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Chapter 10: The Investment Function In Financial-Services Management

Goal of This Chapter: The purpose of this chapter is to discover the types of securities that
financial institutions acquire for their investment portfolio and to explore the factors that a
manager should consider in determining what securities a financial institution should buy or
sell.

Objectives:
Like any other firm, banks make investments. What are some of the factors they take
into account before investing?
What would be an example of bank investment?
What are some of the investment instruments that banks use to invest. Explain the
uniqueness of each of these instruments. For example, Treasury Bills, Short-term Notes
and Bond, Certificate of Deposits, Corporate bonds.
Explain some of the risks that banks have to deal with when investing?

Assignments

Read the Chapter

Do the following Problems: 1,4,5

Answer these discussion questions:

1. Why do banks and other institutions choose to devote a significant portion of their
assets to investment securities?

2. How is the expected yield on most bonds determined?

Week 13: November 9- November 15

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 &
Week 14: November 16- November 22
Chapter 15: The Management Of Capital

Goal of This Chapter: The purpose of this chapter is to discover why capitalparticularly equity
capitalis so important for financial institutions, to learn how managers and regulators assess
the adequacy of an institutions capital position, and to explain the ways that management can
raise new capital. Objective:
Recall the key risks that banks take: credit risk, liquidity risk, interest rate risk,
operational risk, exchange rate risk, and crime risk.
Explain how the following can be used to minimize risk: diversification (geographic as
well as portfolio), owners capital, deposit insurance, and quality management.
Relate diversification to the Dont put all your eggs in one basket analogy.
Explain the tension between banks owners trying to keep less of their capital and
regulators trying to make sure that the owners put in sufficient capital (equity) of their
own.
Why are regulators concerned about banks having sufficient capital of their own?
Explain the role of Basel 1 and Basel 2. How does Basel 1 and Basel 2 attempt to solve
the tension between bankers and regulators?
Why is it important to examine capital to risk-adjusted-assets to asset ratios, rather than
simply capital to asset ratios?
Assignments

Read the Chapter

Do the following Problems: 1,4,5

Answer these discussion questions:

1. What crucial roles does capital play in the management and viability of a
financial firm?

2. According to recent research, does capital prevent a financial institution from

failing?

3. What are the most popular financial ratios regulators use to assess the adequacy
of bank capital today?

4. What is the difference between core (or tier 1) capital and supplemental (or tier
2) capital

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Week 15: November 23- November 29
Thanks Giving Break

Week 16: November 30- December 06

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Chapter 16: Lending Policies And Procedures: Managing Credit Risk

Goal of This Chapter: The purpose of this chapter is to learn the steps in a lending process,
regulations in the industry, and the importance of lending policies for banks and other lending
institutions.

Objectives:
Recall the borrowing and lending model of banks.
Explain that credit risk is the major risk that banks take.
Describe the key feature of some loans: real estate loans, financial institution loans,
agricultural loans, loans to individuals.
How do you decide who to give loans and who not to give loans?
How do you decide how much to give? How much interest rate should be charged?
Explain the CAMELS rating on a scale to 1 to 5. One is the strongest, five is the weakest.
Explain the components that go into CAMELS ratings (Character, Capacity, Cash,
Collateral, Conditions and Controls)
Why is CAMELS rating useful? Note that it is useful to measure creditworthiness.
Explain some of the other factors that go into whether to give loans or not. For example,
can the contract be properly documented, how easily can collateral be used?
What are some of the possible types of collateral?

Assignments

Read the Chapter

Do the following Problems: 1,4,6

Answer these discussion questions

1. Explain the following terms: character, capacity, cash, collateral, conditions, and control.
2. What is the CAMELS rating and how is it used?
3. What factors appear to influence the growth and mix of loans held by a lending
institution?

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 Week 17: December 07- December 13
Final Exam Week

Complete Final exam by 11:59 p.m. on December 11. The exam will open at 12:01 a.m.
December? 8.

Exam 3 will consists of multiple choice questions, and essay questions.

College of Business Administration Policies

Classroom Behavior
The A.R. Sanchez, Jr. School of Business encourages classroom discussion and academic
debate as an essential intellectual activity. It is essential that students learn to express and
defend their beliefs, but it is also essential that they learn to listen and respond respectfully to
others whose beliefs they may not share. ARSSB will always tolerate diverse, unorthodox, and
unpopular points of view, but it will not tolerate condescending or insulting remarks. When
students verbally abuse or ridicule and intimidate others whose views they do not agree with,
they subvert the free exchange of ideas that should characterize a university classroom. If their
actions are deemed by the professor to be disruptive, they will be subject to appropriate
disciplinary action, which may include being involuntarily withdrawn from the class.

Copyright Restrictions
The Copyright Act of 1976 grants to copyright owners the exclusive right to reproduce their
works and distribute copies of their work. Works that receive copyright protection include
published works such as a textbook. Copying a textbook without permission from the owner of
the copyright may constitute copyright infringement. Civil and criminal penalties may be
assessed for copyright infringement. Civil penalties include damages up to $100,000; criminal
penalties include a fine up to $250,000 and imprisonment.

Copyright laws do not allow students and professors to make photocopies of copyrighted
materials, but you may copy a limited portion of a work, such an article from a journal or a
chapter from a book for your own personal academic use or, in the case of a professor, for
personal, limited classroom use. In general, the extent of your copying should not suggest that
the purpose or the effect of your copying is to avoid paying for the materials. And, of course,
you may not sell these copies for a profit. Thus, students who copy textbooks to avoid buying
them or professors who provide photocopies of textbooks to enable students to save money are
violating the law.

Plagiarism and Cheating

Plagiarism is the presentation of someone elses work as ones own. Recently, the Internet
has complicated the picture. Getting something from the Internet and presenting it as ones

18
own is still plagiarism. Copying another students paper or a portion of the paper - is usually
called copying. Neither plagiarism nor copying will be tolerated. Should a faculty member
discover that a student has committed plagiarism, the students will receive a grade of F in that
course and the matter may, if necessary, be referred to the TAMIU Honor Council for possible
disciplinary action.

Students with Disabilities

Texas A&M International University seeks to provide reasonable accommodations for all
qualified persons with disabilities. This University will adhere to all applicable federal, state,
and local laws, regulations and guidelines with respect to providing reasonable
accommodations as required to afford equal education opportunity. It is the students
responsibility to register with the Disabilities Services Coordinator located in the Student
Counseling Center and to contact the faculty member in a timely fashion to arrange for suitable
accommodations.

Safety and Security- You are the Difference

Your safety and security are of prime concern here at Texas A&M International University,
and the University police department work hard to ensure the campus is a safe place to live,
learn, work and play. TAMIU is not, however, exempt from crime. To be safe and secure, you
must take common sense precautions. Be alert and aware of those around you; look out for the
safety of others. Do not leave valuables unattended; do not attempt to touch or interfere with
our wildlife.

Student Responsibility For Dropping a Course

It is the responsibility of the STUDENT to drop the course before the drop date. Faculty are
not responsible for dropping students who suspend class attendance.

Final Examination
The University requires all final Examinations be comprehensive and be given on the day
specified.

Student Attendance and Leave of Absence (LOA) Policy:

As part of our efforts to assist and encourage all students towards graduation, TAMIU provides
LOAs for students, including pregnant/parenting students, in accordance with the Attendance
Rule (Section 3.24) and the Student LOA Rule (Section 3.25) which includes the Leave of
Absence Request form. Both rules can be found in the TAMIU Student Handbook:
http://www.tamiu.edu/studentaffairs/StudentHandbook1.shtml).

Under Title IX of the Education Amendments of 1972, harassment based on sex, including
harassment because of pregnancy or related conditions, is prohibited. A pregnant/parenting
student must be granted a leave of absence (LOA) for as long as the students physician deems
the absence medically necessary. Specifically, a pregnant/parenting student is afforded the
following:

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(1) Submit work after a deadline that was missed because of a LOA due to pregnancy or
childbirth.
(2) If grading is based in part on class attendance or participation, earn the credits missed so
that the student can be reinstated to the status held before the LOA.
(3) At the conclusion of the LOA, return to the same academic and extracurricular status held
when the LOA began.

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