The Business of Banking and Prudential Regulation (SC)

The course will cover the prudential regulation of banking institutions through capital and liquidity requirements. It will begin by describing the business of banking before turning to prudential regulation. To motivate the need for prudential regulation, we will discuss the dynamics of bank runs and focus on recent crypto stablecoin and bank failures (e.g., Terra/Luna and Silicon Valley Bank). Some time will also be spent examining the extraordinary measures taken by the Federal Reserve and Treasury Department to support the economy and financial markets during the Covid-19 health crisis. The course will finish with an in-depth look at the development and evolution of the Liquidity Coverage Ratio from a Basel III international standard to a U.S. regulation, including implementation and interpretational challenges faced by regulated banks. In addition to gaining specific knowledge about the prudential regulation of banks, the course is also meant to provide students a better understanding of financial institutions and markets as well as regulatory compliance and interpretation.