Coursework

The Coursework Task

Context

Theme 3 of our module covers a number of areas relating to risk and risk management whilst Theme 4 looks at the operational aspects of financial institutions. Both are set against a background of minimising risk through regulation.

The quote below is from a Senior Risk Manager of a UK Clearing Bank, speaking on BBC Radio 4, August 2020:

“As well as the normal risks we as bankers face namely; credit, liquidity and solvency risk, today we also have to face other risks such as technology risk, reputational risk and the ever-present risk associated with contagion.

In addition, pressures come from both shareholders and government. Shareholders want us to increase our profits and government want us to lend to as much as possible to stimulate the economy. However, we are working within a background of strict international regulation which is designed to protect customers as well as the financial system.”

Required:

Discuss the nature and significance of the risks identified in the quote above. Additionally, describe and illustrate how banks can manage these risks. In so doing, set your discussion, description, and illustrations in the context of the regulatory framework that banks work within, and assess whether the drive for lending and profits is realistic within the current regulatory framework.

Note

Your conclusions should be based on evidence you have reviewed and you may draw upon relevant theories and ideas and where appropriate use analysis, arguments and justification by using examples and illustrations.

In answering this question, you should not only refer to material you have in Themes 3 and 4 in the study materials (at the end of the document I listed all the readings which are referred to as essential) but you should also look at additional journal articles, trade association publications, and annual reports, showing us that you can conduct relevant and independent research. An in-depth knowledge of Basle 3 is not expected but you might want to refer to it in your answer.

Key descriptors:

Critical evaluation – here you must provide your verdict on the issues and draw conclusions as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. You must provide evidence from a number of sources which both agree and disagree with the argument presented. You are also required to produce a final conclusion based on your decision on what you think to be the important factors and then justifying how you have made your choice.

Review – this involves you thoroughly looking into a subject. There should be a critical assessment and not just a descriptive review.

Analyse – break an issue into constituent parts and fully discuss these parts.

Additional guidance:

At Masters level, what is important is to not just draw from materials located in the core study materials (at the end of the document I listed all the readings which are referred to as essential) but to supplement them with further additional research you undertake. For example, if you intend to review the way the Basel Accords have developed and the way this is used as the current regulatory model then additional research outside the core material provided will be necessary.

In addition, whilst it is important to analyse the points made there is also a need to review the pros and cons of issues presented and explain why the points made are important to help you to answer the issues in the question. The question specifically requires critical evaluation so just presenting a list of points is not enough.

Some thoughts on process for this essay

As you read through the points detailed below be aware that given the nature and scope of the essay there is in effect no one correct answer. Your essay will be judged on the merits of its scope and relevance of the materials selected, the arguments and contentions put forward and the flow of the work. It is one matter to identify relevant materials and set out key points, it is another to set them out in a manner – assemble them – in a way which makes academic sense. It is not uncommon for individual paragraphs to read well on a standalone basis but to lack an ongoing narrative thread – a story line – which promotes cohesion and integration. A well-constructed, appropriately referenced, argument invariably make it easier for the marker to award higher marks. In this particular essay, given i) the context set, and ii) the task/requirement, it would make sense to (in which ever order you as the essay author feels appropriate):

1. Set out an introduction clearly outlining what it is you are looking at, why you are looking at it, and how you intend to set about looking at it.
2. Critically evaluate the risks mentioned in the quote and critically review the risk management systems adopted by banks.

iii. Discuss the current regulatory system and explain how the risk-asset approach works

1. Critically assess whether the drive for lending and profits is realistic within the regulatory system that currently is in place.
2. Draw a conclusion based on the evidence that you have produced. Ensure that your conclusions are justified through the evidence you have provided.
3. Ensure that all of the points above that you include together with any others, are set within a piece of writing which is integrated and coherent and ‘flows’. Do not put forward a set of standalone paragraphs which, if the essay were a book might be wonderful individual chapters, but as a book do not flow into and out of each other, generating a reading experience which is likely for the reader to be unsatisfactory, probably unconvincing, and certainly a deflating experience – and leading to a lower mark.

Most important readings recommended for the Themes covered (standard reading, additional research to be added in order to show variety of references):

Please make sure you take some of the given references to show the course material is used and of course on top a lot of up to date Journals etc…

One key resource is from Arnold (2012) the book: Modern Financial Markets & Institutions: a practical perspective