BEAM065 Bank Management Coursework 1 Brief

Option 1 (100 marks) – From Compustat (available through WRDS) or Orbis,  download relevant data for at least 50 banks (depository institutions), from any  country of your choice. Run at least 6 different regression models to examine  how the banks’ ROA might be affected by:  

a) Credit risk  

In particular, you could examine:  

• The impact of non-performing loans  
• The impact of loan-loss provisions

b) Lending policies  

In particular, you could examine:  

• The impact of lending growth  
• The impact of the business model (e.g., different categories of  loans) 

c) Size  

• Usually, the literature considers the natural logarithm of total assets  (or market capitalization, for listed banks) as a proxy

d) Capital structure  

In particular, you could examine:  

• The impact of Tier 1 ratio  
• The impact of the equity multiplier  

You should consider the relevant literature to justify your choice of proxy for each variable in your methodology discussion. You can use whatever econometric specification you deem appropriate. You can also add further control variables.  

Then, discuss whether your results are consistent with your expectations (by comparing them with the relevant literature), and what might be driving any unexpected result.  

Option 2 (100 marks) – Answer two of the following four questions:

a) What are the potential consequences of interest rates near or below zero in  terms of:

• Bank performance  
• Bank risk-taking  
• Bank lending  

b) How can we estimate the potential impact of a new regulation on bank shareholders, before it is actually implemented? Provide some examples  of recent academic papers that have attempted to do this, and briefly  describe their findings.

c) Describe how competition in banking markets might affect:  

• Access to bank funding, and related cost, for SMEs (small-medium  enterprises)  
• Economic growth (especially at the local/regional level)  

d) Describe how capital requirements might affect:  

• Bank performance  
• Bank credit risk