TOPIC 1: FINANCIAL SYSTEM OVERVIEW

1.Examine and define the nature of financial systems (financial sector)/nature and definition of the financial system

2.Components of financial system

3.Key players in financial system and their role

4.Distinguish between three lines of reasoning that explains the essence of financial intermediaries

5.Current financial intermediation theory builds on the notion that intermediaries serve to reduce transaction costs and informational asymmetries. As developments in information technology, deregulation, deepening of financial markets, etc. tend to reduce transaction costs and informational asymmetries, financial intermediation theory shall come to the conclusion that intermediation becomes useless.

Required:

a)Do you agree? Support your arguments

b)When information asymmetries are not the driving force behind intermediation activity and their elimination is not the commercial motive for financial intermediaries, then which paradigm, as an alternative, could better express the essence of the intermediation process? Your discussion should highlight on which forces really drive the financial intermediation process in this context.

6.With the aid of diagram, illustrate or depict the structure of a financial system [using any relevant approach, preferably structural approach depict/analyze the structure of a financial system]

7.What determines the effective functioning of a sound financial structure? (explore any three determinants)

8.Broadly, the functions of financial system can be examined under three lines namely monetary function, capital allocation function, and controlling function

Required:

Give a detailed account of the functions of a financial system

9.Examine the importance (role) of a well-functioning financial system/ Evaluate the role of financial system in economic development.

...............................................OR............................

Throughout the past three decades, there has been growing recognition for the positive impact of financial intermediation on the economy. Both theoretical and empirical studies find that a well-developed financial system is beneficial to the economy as a whole.

Required:

Examine the principal arguments behind this idea

10. Identify and explain typical characteristics or features of small (underdeveloped) financial systems common in Africa, clearly describing the adverse impact small size on financial systems may have on the economy

11. Provide a brief commentary on the challenges facing Tanzanian financial system

12. Examine the major forces shaping the current financial environment

13. Financial repression and financial deepening are important concepts in the study of growth of financial systems

a.Explain the meaning of financial repression in the context of financial systems

b.In view of the key characteristics of financial repression, examine barriers to development and growth of financial systems in a developing context like Tanzania

c.How best can governments in developing countries deal with the problem of financial repression?

d.Under what circumstances government may opt for financial repression policies?

14. The relationship between real and monetary variables is undeniable. Yet, policy makers in African countries have failed to follow an active policy of developing the domestic monetary and financial sector.

Examine why this is the case clearly describing factors responsible for this phenomenon

15. What are the determinants (basic or key elements) of a well-functional financial system?

16. The central bank is the national financial institution that exercises control over key aspects of the financial system and is responsible for formulating monetary policies.

Required

a)Explain the primary functions of Bank of Tanzania

b)Guided by contemporary theory, explain 3 objectives of monetary policy. Which one do you consider more prime and why?

c)Specify two main forms of monetary policy

d)Discuss relevant tools to implement monetary policies

e)Analyze how monetary policy influences economic growth

TOPIC 2: FUNCTIONS AND OPERATIONS OF FINANCIAL INSTITUTIONS

1. According to the structural approach, the financial system of an economy consists of six main components namely financial markets; financial intermediaries (institutions); financial regulators; financial infrastructure; financial services; and financial instruments (highlight specific arguments to support the essence of financial institutions as one of the key components in a financial system

Required:

Examine the reasons financial institutions are important in a financial system (highlight specific arguments to support the essence of financial institutions as one of the key components in a financial system)

1. Today, the importance of financial services is gaining momentum all over the world. As a result of innovations, new instruments and new products are emerging. Many financial intermediaries including banks have already started expanding their activities by offering a variety of new products as discussed next.

Required:

a)Identify any five such new financial products and services which have emerged as a result of new trends and developments in financial sector

b)Explain the nature, objectives and the of each of the financial product/service identified in (a) above

c)Evidence suggests that the new financial products and services are not widespread in Tanzania. Examine why is this the case (case by case analysis).

1. International Financial Institutions (IFIs') unique comparative advantage and the contributions they have made toward addressing global issues are well recognized. Yet there is a rising expectation on the part of almost all stakeholdersdeveloped and developing country shareholders, academics and think tanks, civil society organizations, and business leadersthat IFIs need to do still more in this domain. A number of concerns about IFIs raise questions about the role they can play in global issues management. Many suggestions have been put forward for reform of IFIs. A consensus is that reform is needed if their shareholders expect them to play an increasing role in regional and global development issues.

Required:

What are the key issues involved in this concern? Your discussion should analyze the nature and basis of the critiques, clearly explaining the underlying arguments behind this idea or concern to reform IFIs.

TOPIC 3: REGULATIONS OF FINANCIAL INSTITUTIONS

1.Examine the principal reasons financial-service firms are subject to government regulation. Your analysis should point to the main arguments for regulating financial institutions/financial markets.

2.Financial institutions and markets are among the most regulated markets in modern economies. Methodically, the main objectives of regulation of financial sector (financial institutions and financial markets) are studied under the three main lines of arguments namely customer protection, maintaining financial stability, and monetary control improvement.

Required:

a)Examine the rationale behind these objectives (i.e. why is it necessary to protect customers? why is it important to maintain financial stability? why is it important to improve monetary control?)

b)How are financial institutions and financial markets regulated in a view to achieve the objectives of regulation of financial sector? Support your answer by considering (referring to) existing specific regulations implemented by the government (preferably government of Tanzania) with the aim to:

i.Increase the information available to investors (customers protection);

ii.Ensure soundness of financial intermediaries (to protect the public and the economy from financial panics) (any six types of regulations); and

iii.Improve monetary control

3.What kinds of regulatory rules or guidelines are relevant for each of the following financial institution (and why)?

a)Banking institutions

b)Pension funds

c)Insurance companies

d)Microfinance institutions

4.bbb

TOPIC 4: SECURITY AND INVESTMENT MANAGEMENT IN FINANCIAL INSTITUTIONS

1.Although numerous separate decisions must be made in the decision process in investments as it is typically practiced today,this decision process has traditionally been divided into a two step process: security analysis and portfolio management. Explain the meaning of these concepts

1. For some good reasons, banks often devote significant portion of their asset portfolios to another major category of earning asset, that is, make investments in securities that are under the management of investments officers. Likewise, several nonbank financial services providers (e.g. insurance companies, pension funds, mutual funds) often devote an even bigger portion of their assets to investment securities. These instruments exist in different forms (types), as such, the number of investment (financial) instruments available for financial institutions to add to their securities portfolios is both large and growing. In essence, these security holdings perform a number of vital functions in the assets portfolio of financial firms

Required:

a)Examine different investment instruments (financial instruments) available for financial institutions, clearly describing the advantages and disadvantages of each. You are advised to analyze them under the two broad categories namely money market instruments and capital market instruments

....OR.....What are the principal money market and capital market instruments available to financial institutions today?

b)Examine the functions of the investment security portfolio clearly describing why should a financial institution hold investment security portfolios.

1. Assume a role or position of investment portfolio manager. What will be your primary roles and functions?
2. There arefundamental investing principlesthat apply to each of us whether we are seasoned portfolio managers or a novice investor. It is very importantto take time to periodically review these important principles and improve the foundations upon which we make investment decisions. Review any five such principles of sound security investments

5.The investment officer of a financial firm must consider several factors in deciding which investment securities to buy, sell, or hold. Basically, a wide range of factors affect choice of investment securities, as such, an investment officer must have sufficient understanding of these. Provide a detailed review of the principal factors which the investment officer needs to considerwhen deciding which investment security to choose (your review should explicitly focus on factors affecting the choice of investment securities)

1. What are the popular money market instruments? Why? Specify popular capital market investment instruments and give the reasons for the preferences
2. Review key characteristics of treasury bills which distinguish it from other securities, and hence, make it more attractive to many investors relative to other instruments
3. What type of investment securities do banksseemto prefer the most? Can you explain why?

9.Modern portfolio theory suggests that the traditional approach to portfolio analysis, selection, and management may yield less than optimum results. Hence a more scientific approach is needed, based on estimates of risk and return of the portfolio and the attitudes of the investor toward a risk-return trade-off stemming from the analysis of the individual securities.

Required:

a)What are the weaknesses and/or deficiencies of traditional approach to security analysis and portfolio management?

b)What are the effective measures of return and risks in financial institutions?

c)How do we measure or calculate expected rate of return (ERR)? What is the most popular basis for determining ERR?[use an example (any hypothetical calculation) to illustrate your answer]

d)Lay down principal characteristics of an investment/ Review different characteristics or basic elements (features) of an investment

e)What determines expected return from an investment?

TOPIC 6 [5]: INVESTMENT VALUATION IN FINANCIAL INSTITUTIONS

1.Investment process is governed by the two important facets of investment-risk and return. Admittedly, these two basic parameters are of critical importance to all investors

Required:

a)Provide a detailed review of different measures of rate of return

b)Explain the following concepts, clearly illustrating how do we calculate each

i.Bond's coupon rate

ii.Yield to maturity

2.Discuss the relationship between Interest rates and security prices

3.What are the determinants of the level of interest rates in banks?

4.Distinguish between short-term investment and long-term investments (use examples)

TOPIC 7[6]: RISK MANAGEMENT IN FINANCIAL INSTITUTIONS

1.Examine why financial institutions need to manage risk

2.Review different categories and types of risks incurred by financial institutions

3.Ascertain strategies for managing credit risks

4.The 2008 Global Financial Crisis completely changed the landscape of risk management for financial markets and financial institutions, as such, poses challenges to the traditional risk management practices. The crisis provided a rude awakening for the local and international financial world. It showed that rules and procedures alone are not sufficient to prevent a '2008' from occurring.

Required:

a)Give an account of the 2008 Global Financial Crisis (....what is it; how, where and why it happened etc....)

b)What lesson (if any) can we learn from the 2008 Global Financial Crisis

c)Propose how banks can better manage risks to prevent financial crisis similar to 2008 Global Financial Crisis from recurring)

TOPIC 8: FINANCIAL MARKETS

1.Please be guided by the course outline while revising this topic. Try to pay particular attention to different terminologies of the topic

Additional questions

2.What explains high/low participation rate in a stock exchange?[i.e. What explains variation in capital market participation among countries/among stock markets across the world...i.e. what explains capital market performance/factors responsible for capital market performance

3.Categorically, the major factors influencing stockmarket developmentin line with empirical literature include macroeconomic,institutional, and behavioural factors

Required:

a)Examine the major macroeconomic and institutionalfactors influencing the development and/orperformance of financial markets (stock market)

b)Review effect or influence of behavioural finance on the performance of capital market

4.Examine the reasons (arguments) prices in competitive markets must followa random walk

5.What are the implications of EMH critics and anomalies to investment managers? What lesson can be learned from these criticisms?

6.Provide a review of deficiencies in the African financial market (pay particular attention to the Dar Es SalaamStock Exchange-DSE)

Cross-cutting question (s) and typical research agenda questions

1.The financial sector vocabulary is full of concepts which you did not, or hardly, knew before and full of expressions you never used to before undertaking financial institution as one of the modules in your Masters degree. Now that having attended this module you are very familiar to these concepts. Your friend,CPA Msafiri Salama, inexperienced Managing Director to one of the banks in the city has consulted you in a bid to offer trainingto a newly appointed board of directors whose composition is made up of different backgrounds (lawyers, administrators, accountants, economists). Your task is to pass them through some relevant concepts with a view of making them understand the technical jargons common in financial systems literature....

Required:

Prepare short notes to guide your training on the following concepts

a)asymmetric information

b)adverse selection

c)moral hazard,

d)credit rationing,

e)risk appetite

f)expected rate of return

g)coupon rate

h)yield to maturity

i)securitization of assets

j)any other key concepts and terminologies from financial institutions literature and as per your FIN 5213 Course which you wish to introduce to your audience

2.What is the role of financial institutions in financial innovation?.

3.What are the economic bases for differences among financial systems across countries and through time?

4.How should non-bank financial intermediaries be regulated?"