Banking is one of the most complex areas of modern economies. Flawed understanding, mismanagement, and bad regulation of banks have caused the Great Financial Crisis of 2007-2010 and the worst economic crisis in Europe in decades. This course will shed some light on the theory of banking and recent empirical insights into the functioning of banks. Starting from a thorough discussion of basic conceptual frameworks it will discuss elements of shadow banking, financial stability, and bank regulation.
The course provides an introduction to the conceptual foundations of banking and explores the workings of banks in modern economies, by looking at problems of credit intermediation, liquidity provision, maturity transformation, relationship lending, and bank competition.