Financial Systems: Markets And Institutions

The aim of this module is to furnish the student with a coherent background on the financial environment in the developed world. While reference to alternative Islamic standing is important, the primary objective is to develop the student's cognitive skills to critically explain the main forces impacting upon the World financial and banking systems of typically advanced economies. Attention will be focused mainly upon the British and U.S. systems and regulatory experiences

Optional

None

None

• Introduction to financial markets: basic functions; types of markets and profiles; financial instruments
• General structure of financial markets: role of information asymmetry and transaction costs in shaping financial markets, common features among financial intermediaries; activity of investment market specialists
• Financial institutions: retail banking, investment banking, mutual funds, insurance companies and pension funds
• The theory of financial regulation; different schools of thought; alternative schemes of banking regulation
• International financial markets (IFM): evolution of IFMs, modern foreign exchange markets, implications to monetary policy. Islamic implications

Knowledge and Understanding

On successful completion of the module students should be able to:

1. Acquire basic knowledge of the modern financial environment, its structure, operation and change potentials

2. Understand the functioning of different financial intermediaries with special emphasis on the banking institutions

3. Critically analyse the impact of informal asymmetry and transaction costs on the structure, operations and regulatory  framework of developed financial markets and institutions 

4. Appreciate the importance of prudent financial market     and banking sector regulation

5. Identify the economic forces which underlie the prevalence of debt-based financial systems over pure equity-based interest-free financial system as advocated in Islamic Economics

6. Contribute to the current dialogue on financial market development and banking regulation

7. Understand the theory of financial regulation; different schools of thought; alternative schemes of banking regulation

Skills

By the end of the module students should have developed skills to enable them to:

1. Simplify apparently complex financial systems and institutional structures in terms of clearly identifiable economic forces

2. Assess the efficiency of financial markets in terms of economic information and transaction costs

3. Perceive the needed regulatory role to guard against hidden risks in the performance of alternative financial institutions

4. Critically evaluate and objectively appraise financial efficiency for alternative financial systems and institutions

5. Contribute to the development of Islamic interest-free financial systems and institutions to meet rising needs in the Muslim world

6. Independent working, work organization and clear methodology in research

7. Contribute to contemporary dialogue on financial issues at both the theoretical and practical frontiers

8. Work closely with others through effective communication and team work spirit

Lectures, seminars, tutorials, assignment, examination. Each student is expected to participate in 150 hours of effort, including Lectures (6 hours), Seminars (9 hours), Tutorials (3 hours), plus guided personal study

Examination (2.5 hours, standard, closed)  30%

One assignment of 2,500 words                 60%

Seminar presentation                                10%

Further references and periodical articles will be provided to the students with lecture outline handouts

1.     Bayne, Michael R. and Dennis W. Jansen W, (1995) Money Banking and Financial Markets: an economic approach,   Houghton Mifflin Co. Boston, Toronto etc.

2.     Blake, David, (2000) Financial Market Analysis, John Wily and Sons Ltd.

3.     Chapra, Umar and Habib Ahmed, (2002) Corporate Governance in Islamic financial institutions, IRTI, IDB, Jeddah.

4.     Edwin, H. Neave, (2002) Financial systems: principles and organisation, London: Routledge.

5.     Fabozzi, Frank J. (ed.), (2002) Financial Instruments, John Wily & Sons Inc.,

6.     Gough, Leo, (1995) How The Stock Market Really Works, FT: Pitman Publishing.

7.     Howell, Peter and Bain, Keith, (2004) Financial Markets and Institutions, FT:Prentice-Hall.

8.     Mishkin, Fredric S & Stanley G. Eakins, (2000) Financial Markets and Institutions, Addison Wiley.

9.     Pilbeam, Keith, (1998) Finance and Financial Markets, Palgrave.

10.   Spencer, Peter D., The Structure and Regulation of Financial Markets, Oxford University Press, 2000