Mastering the Fundamentals of Banking

Explore bank balance sheets, their key components, and the EU standardized regulatory reports for balance sheets and profit or loss to enable fair competition and risk monitoring.

Learn how a balance sheet presents assets, liabilities, and capital, and how assets equal liabilities plus capital, with banks funded by share capital, deposits, and debt securities.

Explore how banks turn cash and deposits into assets, including loans, securities, and tangible assets, and understand debt and equity securities and their income potential.

Analyze Bank X's balance sheet as of December 31, 2021, detailing cash on hand, demand deposits, cash equivalents and central bank reserves, and loans and mortgages totaling €857 million.

Examine Bank X's liabilities and capital, including demand and term deposits from retail and non-retail customers, totaling €792 million in liabilities and €65 million in capital, with €857 million assets.

Explore why banks carry unique balance sheets, with loans as assets and deposits as liabilities, unlike non-bank firms, and how the balance sheet equation governs assets equals liabilities plus capital.

Explore how bank capital and liquidity interact to determine solvency and the risk-return trade-off, and how a liquidity crisis can erode solvency while deposits are prioritized.

Analyze bank A as a liquidity-conscious yet undercapitalized bank with cash and safer and riskier loans, where a €2 million bad debt reduces capital from €3 million to €1 million.

Explore Basel iii regulatory capital, including tier one, tier two, common equity, c81, and AT1, and examine the risk-return trade-off of managing liquidity with long-term illiquid assets and liquid assets.

Explore bank statements of profit or loss, income statement, and learn to calculate net profit by adding income and gains and subtracting expenses and losses for the current reporting period.

Analyze Bank X’s statement of profit or loss for Q4 2021, covering interest income and expense, net interest income, dividend and fee income, trading gains, and net total operating income.

Analyze Bank X's profit or loss statement, noting salaries, expenses, depreciation, provisions, and tax. See how net operating income yields €9 million net profit.

Explore ratio analysis to assess bank performance, focusing on asset quality, balance sheet structure, profitability, and capital ratios, with attention to varying definitions and footnotes.

Analyze asset quality with NPL ratio and coverage ratio. Assess balance sheet structure with loan to deposit, loan to asset, and equity ratios to gauge liquidity risk and absorb losses.

Assess bank profitability by analyzing net interest margin, net interest income to total operating income, cost-to-income ratio, ROA, and ROE in varying interest rate environments.

Explore capital ratios, including risk weighted assets and the leverage ratio, and see how stakeholders use asset quality, balance sheet structure, profitability, and capital ratios to gauge bank health.

Explore banking products for households and firms, including current accounts with debit cards and online banking, and cross-sell options, plus contrast demand and term deposits with fixed or variable rates.

Explore how banks offer savings and investment options, loans, secured and unsecured lending, and mortgages - including down payments and deposit guarantee schemes protecting deposits up to €100,000.

Explore credit cards, overdrafts, and letters of credit as key banking products, including limits, interest, fees, and how they support online and international trade.

explore digital banking services, including online and mobile banking, fund transfers, balance checks, and bill payments, plus private banking with tax advice, investment and wealth management, and insurance options.

Banks must move beyond the traditional suite of products and services by investing in digitalization, innovation, and technology to meet tech-savvy customers and improve the banking experience.

Explain the causes of the 2007-2008 financial crisis, examine originate-to-hold and originate-to-distribute banking models, and outline its unfolding, global spillover effects, and the rationale for post-crisis reforms.

Examine the origins of the 2007–2008 financial crisis, including low rates, lax lending such as ninja loans, the housing bubble, rising leverage, deregulation, and the growth of derivatives.

Explore the originate to distribute model and asset backed securities; see how rating agencies like Standard and Poor's, Moody's, and Fitch assess risk on scales from AAA to D.

Trace the origins of the 2007–2008 financial crisis, showing how subprime defaults and asset-backed securities sparked global contagion and the Bear Stearns and Lehman Brothers collapses.

Explore Northern Rock's originate-to-distribute banking model, reliance on non-deposit funding and securitization, and how liquidity risk led to the 2007–2008 crisis and bank run.

Northern Rock's demise escalated through 2007 as subprime defaults, funding costs rose, and confidence in securitization fell, triggering a liquidity squeeze and a bank run.

Identify key lessons from the northern Rock collapse, including no public funds resolution regime and robust liquidity management to protect essential financial functions.

Explore the Basel regulatory framework and Basel capital accords, from I to IV, and learn how the Basel Committee drives capital adequacy, risk management, and supervision for internationally active banks.

Explore Basel I fundamentals: regulatory capital, tier one and tier two, risk weighted assets, the 8% capital adequacy ratio, and the 1996 market risk amendment.

Basel II, published by BCBS in 2004, introduces minimum capital requirements, supervisory review process, and market discipline to govern credit, market, and operational risk, with standardised or internal models approach.

basel iii strengthens bank capital, leverage, and liquidity rules after the 2007–2008 crisis, while introducing systemic regulation to safeguard the entire financial system.

Explore Basel iii elements: capital adequacy with common equity tier one, buffers, a 3% leverage ratio, liquidity measures LCR and NSFR, and loss-absorbing capacity for global systemically important banks.

Examine Basel four reforms, including internal model deployment and leverage ratio updates, and trace Basel three’s evolution to strengthen global banking regulation and risk management.

Explore challenger banks and how online banking reshapes profitability and regulatory compliance. Build operational resilience, cybersecurity, and diversity and inclusion to thrive amid climate change and digital competition.

Explore how bank profitability, including low periods, affects retained earnings, loss absorbing capital, and resilience, and consider strategies like cost cutting, efficiency, automation, and diversified income in a regulated environment.

Strengthen banking operational resilience and cybersecurity by protecting customer and staff data, identifying essential staff, and embedding an ethical, customer-oriented culture.

Diversity and inclusion strengthen bank governance by reducing groupthink and boosting innovation, with banks defining DNI strategies, metrics like gender composition and minority representation, and public disclosures.

Explore how climate change pressures banks to manage climate-related risks, limit fossil fuel lending, fund renewable energy projects, offer green mortgages, and appoint risk officers.