Banking & Financial Intermediation: Concepts, Risks, Capital & Regulation

3-4 hours per week

Course Information

Course Length     : 6 weeks
Estimated Effort  : 3 – 4 hrs per week

Course Overview

Banks and other financial intermediaries make up a large part of the ecosystem that channelizes money from those who have it (also known as savers/investors) to those who need it (the borrowers). Central Banks in most countries also use that ecosystem to effectively manage money supply or liquidity and to safeguard the stability of the financial system. This MOOC on Banking and Financial Intermediation: Concepts, Risks, Capital, and Regulation is designed to help learners understand the macroeconomic context governing such banking and financial intermediations.

The MOOC will look at the products and services offered by banks and financial intermediaries; and also study the significant complexities and risks that they encounter in conducting their business in a globally interconnected world. It will address, in detail, the embedded risks in banking and financial intermediation such as credit risk, off-balance-sheet risk, operational risk, liquidity risk, solvency risk, etc., and examine how these risks can be identified, measured, and managed, using several risk mitigation techniques and regulatory mechanisms.

This course is taught by Prof PC Narayan and is part of IIMBx’s Professional Certificate Program ‘Risk Management in Banking and Financial Markets’.

Professor PC Narayan

Course Instructor
Finance and Accounting
Indian Institute of Management Bangalore (IIMB).

Course Syllabus

Week 1: Overview of Banking and Financial System
  • Overview of Banking and Financial Intermediation
  • How and Why are Banks Different From Manufacturing Companies?
  • How and Why are Financial Markets Different From Product Markets?
  • ‘Market for Lemons’ and it’s Relevance to the Financial System
  • Determinants of Interest Rates
  • Term Structure of Interest Rates
  • Forward Rate
  • Summary and Additional Readings
Week 2: Financial Intermediation Process
  • Financial Intermediation: An Overview
  • Components of Financial Intermediation
  • Financial Intermediation: Sources and Applications of Funds
  • Financial Intermediation: The Lending Function
  • Financial Intermediation: Non-Fund Based Services
  • Summary and Additional Readings
Week 3: Lending and Credit Risk
  • Overview of Risk Management in Banking and Financial Markets
  • Risks in Retail Lending
  • Risks in Lending to SMEs
  • Measuring and Managing Credit Risk
  • Monitoring Credit Risk
  • Summary and Additional Readings
Week 4: Credit Risk Assessment Models; Operational Risk; Off-balance Sheet Risk
  • Credit Risk Assessment Models
  • Loan Concentration Risk and Loan Portfolio Risk
  • Off-Balance Sheet Risk
  • Operational Risk
  • Summary and Additional Readings
Week 5: Liquidity and Solvency Risk
  • Overview of Liquidity and Solvency
  • Managing Liquidity (CRR and SLR)
  • Managing LiquidityRisk
  • Summary and Additional Readings
Week 6: Solvency, Capital Adequacy and Basel Guidelines
  • Managing Solvency and Capital Adequacy
  • Regulation and Monetary Policy for Banks
  • Need for Independence of Central Banks
  • Basel-II Guidelines for Capital Adequacy
  • Summary and Additional Readings

By the end of this MOOC, a learner will be able to:

  • Identify the role of banking and financial intermediation in any economy
  • Outline in the theories and the macro-economic context governing banking and financial intermediation
  • Explain the processes, functions, advantages, and drawbacks of banking and financial intermediation
  • Compare the various types of lending and investing activities undertaken by banks and financial intermediaries and the nature of collaterals/securities used
  • Brief about the importance and workings of non-fund-based business and justify their classification as ‘Contingent Liabilities’
  • Identify, measure, and manage various risks using several risk mitigation techniques and regulatory mechanisms

Recall ‘Capital adequacy’ and ‘Basel guidelines’ and their role in ensuring the stability of the financial system in any country

Executives, students pursuing post graduate and people who are aspiring to develop their skills in the field of banking and finance.


I wish I had taken finance instead of science. Thanks for the material. It bolsters the learning. Thanks again for putting a great effort.