Financial Regulation

and Supervision

Sheffield Business School

Level 7
Barclays boss Bob
Diamond resigns amid Libor
scandal
HSBC ordered to pay - BBC Banks face £3bn bill in mis-
£100,000 over incorrect sold PPI scandal
advice - Financial Times
- The Telegraph

Barclays Boss: Banking

Culture Has To Change
- Sky News Mervyn King: Banks putting
profits before customers
- BBC

Banks' reward structures encouraging

mis-selling, FSA warns
- Financial Times
Dr. Ian Crowther HSBC sets aside $700m for
E-mail [email protected] money-laundering fines
- The Guardian
A. MODULE PACKS

Each student on this module will receive a copy of;

 the module outline including seminar questions (see Blackboard)
 A reading pack with the key articles you should read each week (see Blackboard)

B. DELIVERY METHODS

The module consists of 10 lectures and seminars these are to be supported by self-directed
study time in the form of student reading from the core text, additional readings and
preparing seminar questions. Seminars on this module will primarily involve problem
centred questions provoking student lead discussions and presentations thus enabling
students to apply knowledge gained from lectures and pre-seminar reading. It is essential
students actively read the sections of the core text as directed and good quality financial
press. A number of links are available in this document and on Blackboard.

In addition to the tasks listed in this module learning guide students are advised to
regularly check blackboard for supporting materials. These will be listed in folders
designated for each of the 10 topics studied.

C. NATURE OF THE SUBJECT

Financial Regulation is a technical subject as such students will require knowledge of the
Financial services industry in the UK and other major financial centres in the United
States, Europe and across Asia. Students will be expected to read around the subject by
engaging with and understanding key topics as they arise. The global financial sector is
under intense scrutiny from regulators and as such new stories in the financial press are a
common occurrence. Understanding of regulation is vital but equally so is its application
within industry.

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D. ASSESSMENT
This module has 2 assessments contributing towards a single module mark. Therefore
students are required to attain 50% overall to pass the module. The assessment package
consists of a written piece of coursework and a group presentation.

1. Group Presentation (30% weighting)

Task details will be available on BB. Date for submission is 19 th of March 2021

2. Individual Assignment (70% weighting)

An individual assignment - this will test your abilities to “critically evaluate” global
bank regulations. Date for submission is 7th of May 2021.

3. Reassessment
This class has in module retrieval for the individual assignment only, therefore any
student who does not achieve 50% in Task 2 will have 1 week after the results are
released in which to represent the assignment (having taken on board feedback) for
a capped mark of 50%. If the student does not wish to work through IMR then he /
she will be required to sit a reassessment in the summer. If any student fails to
achieve 50% overall (via the two weighted tasks above, and after IMR), then then a
reassessment in the summer will be required on a task for task basis.

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E. EXPECTED LEARNING OUTCOMES (ELOs)

The learning outcomes which students are expected to achieve through taking this module
are as follows:

1. Appraise the purpose and nature of financial regulation and supervision in

theory and practice.

2. Analyse the contemporary theoretical and practical controversies associated

with financial regulation and supervision.

3. Critically assess the contribution of financial regulatory and supervisory

regimes to the maintenance of financial stability.

4. Evaluate the impact of specific approaches to financial regulation and

F. COURSE READING

1. Core Reading

Core reading as directed each week. See blackboard

2. Additional texts
Barth, J. Caprio, G. & Levine, R. (2006) Rethinking Bank Regulation: Till Angels Govern
Cambridge University Press.

Davies, H., & Green, D. (2008). Global financial regulation : the essential guide.
Cambridge: Polity.

Tattersall, J. (2006). A practitioner's guide to the FSA regulation of banking . Old Woking:
City & Financial Publications.

These texts are useful to provide an overview and purpose of financial regulation. Good
supplementary texts to outline the key areas of global regulation and how financial
institutions are regulated.

3. An overview of the Financial Services Industry

Plibeam, K. (2010). Finance & Financial Markets.3rd Ed. Basingstoke: Palgrave Macmillan

This text is useful to explain the types and services offered by various institutions. Use this
if you're struggling to understand different types of products and services from investment
companies, insurance, banking etc.

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H. RESOURCES

1 MODULE BLACKBOARD PAGE

The Blackboard site is accessed from the Blackboard login-in screen:

http://blackboard.shu.ac.uk/

Your Blackboard username and password are the same as for your e-mail address. Once
found, students are advised to bookmark the URL to facilitate regular use.

The Blackboard site will be up-dated on a regular basis with news and information about
the module in addition to the following resources:

 Weekly links guide

 Assessment information
 General links
 Lecture and tutorial information

2 THE WORLD WIDE WEB

A vast amount of data and information is available in electronic form on the world-wide-
web.

News reports and market information can be found from:

Financial Times homepage: http://news.ft.com/home/uk/ (Subscription required)

Bloomberg homepage: http://www.bloomberg.com/ (IPhone/Pad app available)
BBC homepage: http://news.bbc.co.uk

General information on the business and economic environment is widely available and
the following sites may be of interest to you.

Bank of England: http://www.bankofengland.co.uk/

London Stock Exchange: http://www.londonstockexchange.com/
Chicago Mercantile Exchange: http://www.cmegroup.com/
UK Government Statistics: http://www.statistics.gov.uk/
UK Debt Management Office: www.dmo.gov.uk/
UK Competition Commission: http://www.competition-commission.org.uk/
Bank for International Settlements http://www.bis.org/
UK Financial Services Authority: http://www.fsa.gov.uk/
International Monetary Fund: http://www.imf.org/

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3 VIDEO ON DEMAND (VOD)

Banking, finance and the investment industry have been under increasing public scrutiny
recently with mis-selling investment products, bank remuneration and the consequences of
the financial crisis. As such a number of documentaries are available from the BBC
Panorama and Channel 4 Dispatches.

This video database is available at: http://shu-iptv.shu.ac.uk

The easiest way to find programmes of interest is through Library Gateway

http://library.shu.ac.uk/ search for a key word such as 'banking' this will load all the library
articles matching that word, on the left side you can sort by content type. Click more at the
bottom of this tab and place a tick in the box 'Video Recording' this will then show only the
video documentaries relating to this search.

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I. PROGRAMME DELIVERY
Lecture Seminar
Introduction - Financial
Services Industry N/A

Financial Stability Intro to Regulation

Failures of Regulation Financial Stability
Methods of Regulation Failures of Regulation
Post Crisis Regulation
(PCR) Methods of Regulation

Post Crisis Regs (part

2) PCR - Basel - Vickers

Professional Integrity,
Ethics and Conduct of PCR - Basel 3 - Asset
Business Quality, NSFR and LCR

Professional Integrity,
Money Laundering &
Ethics and Conduct of
Financial Crime
Business
Alternative approaches
to regulation - in the Money Laundering &
east & Islamic Law Financial Crime

Alternative approaches
Drop in to regulation - in the east
& Islamic Law
Revision Lecture Revision Seminar
J. WEEKLY TASKS

Each seminar will have a set of tasks these must be completed before the seminar, in
order to understand the application of financial regulations students must read the relevant
chapter in the core text and answer the questions these will form the basis of discussion in

7
the seminar. You are strongly advised to discuss the seminar questions and ideas from the
reading with other students this will help students understand complex regulations.

In addition to tasks within this guide students must regularly check Blackboard for
academic journals or news articles of interest as they occur.

You will notice some of the questions are exam style and therefore can be taken as
indicative questions. Time will be spent within the seminar teaching students how to
effectively answer this style questions and therefore this will form part of the preparation
process for your essays. Learning how to effectively answer essay / exam questions will
be a useful skill for the entirety of your academic career.

Session One

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Pre-Session Tasks
1. Na

Learning Outcomes
 Understand the objectives of financial regulation
 Evaluate the different types of regulation

Core Reading

Seminar Questions

2. NA

Post Session
3. NA

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

Session Two

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Pre-Session Tasks

Complete core reading

Prepare seminar questions

Learning Outcomes
 Understand the importance of financial stability
 Discuss how financial innovation impacts regulation .
 Evaluate how regulation protects retail customers .

Core Reading
Topic 2 Articles in the reading pack
Chapter 2 (p18) Barth, Caprio and Levine - Rethinking Bank Regulation

Seminar Questions
 A group work activity

Seminar Presentations (Groups to be assigned)

The Financial Stability Report is published twice a year under the guidance of the
interim Financial Policy Committee. It covers the Committee's assessment of the
outlook for the stability and resilience of the financial sector at the time of preparation of
the Report, and the policy actions it advises to reduce and mitigate risks to stability.
From seminar groups and break-outs groups you will be asked to formulate a response
which you can present back to the group via PowerPoint slides. In each group you
should form 2 sub groups and complete the following tasks
GROUP ONE
Sub group 1 - Summarise the main information in section 1 of the financial stability
report – Main risks to financial stability
Sub group 2 - Outline which are positive developments, and which are negative
GROUP TWO
Sub group 1 - Summarise the main information in section 2 of the financial stability
report – Resilience of the financial system
Sub group 2 - Rank the key risks to which you see as being most important and
provide justification.

You have 30 minutes to produce Powerpoint slides and a further 10 minutes to plan
and prepare your presentation. Each presentation for each sub group should not be

10
 more than 15 minutes allowing for time for questions from the class and tutor. Don’t just
describe the report – compare to the principles outlined in the lecture and take a critical
approach! Ensure each group works holistically and the presentation is joined up!

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

11
Session Three
Pre-Session Tasks
Complete core reading
Prepare seminar questions

Learning Outcomes
 Understand the key risks that manifested into the financial crisis
 Understand the differences between operational, systemic and prudential risks and
their importance in the context of regulation
 Critically evaluate the regulatory response
 Appreciate the scope, nature and difficulty of regulating too big to fail organisations

Core Reading
Topic 3 Articles in the reading pack
Chapter 7 (p 214) - Davies & Green - Global Financial Regulation, the essential guide

Seminar Activities
Groups to be assigned in Seminar 2

Based on the principles outlined in the lecture and this week's reading:

Prepare a 10minute presentation on one underlying impact of the financial crisis. Your
presentation should:

Only focus on one element (so some detail and research is expected)
Explain the regulatory response to this
Critically evaluate whether you think this approach was correct - what were the
alternatives if any?

Timing will be strictly enforced - 10mins plus 5minutes for questions. PowerPoint will be
available but think of other resources you could use.

In seminar - Class discussion on the articles and video by Robert Peston - 'Britain's Banks:
Too big to save?'

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

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Session Four
Pre-Session Tasks
Complete core reading
Prepare seminar questions

Learning Outcomes
 Understand the different methods of regulation e.g. Single regulator, Twin Peaks ,
Safety nets and committees (such as Basel)
 Evaluate the advantages and disadvantages of each system
 Appreciate the issues in safety net design cost - how should these be funded
 Discuss the UK regulatory structure and compare this with the US, EU and key
Asian markets

Core Reading
Topic 4 articles in the Reading pack
Chapter 3 (p75) Barth, Caprio and Levine - Rethinking Bank Regulation

Additional Reading

Chapter 5 (UK Regulatory Infrastructure) - FCA Regulation and Professional Integrity

(Professional exam standard book)

Seminar Activities
Form 3 Groups -

3 Tables will be set up with an array of resources -

Each Group will have 25 minutes to look through the resources provided to you.
In that time you will:
 Discuss the articles highlighting key points with guidance from your tutor
 Make an A4 resource that can be photocopied and placed on BB for revision
purposes

At the end the class will feedback their key learning and debate differing opinions.

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

13
Session Five
Pre-Session Tasks

Complete core reading

Prepare seminar questions

Learning Outcomes
 Identify the main components of bank regulation under Basel III
 To discuss the new structure if UK financial regulation
 To evaluate the main contents of the Vickers and Liikanen reports

Core Reading
Topic 5 articles in the reading pack

Seminar Activities
a few years ago, Sir John Vickers, chairman of the Independent Commission on
Banking, proposed a number of changes to the way in which UK banks should be
regulated and constructed. He and a committee were appointed to review the UK
banking landscape. The primary aim of their report was to protect consumers from the
riskier activities many high street banks now took part in.

Form 4 seminar groups and you will be given some flipchart paper and pens.

GROUP ONE
Outline what ring fencing is, why it is key to the proposals which the Vickers report puts
forward and whether banks will all take a different approach to what is in and out of the
ring fence (refer to banks publications for guidance on this).

GROUP TWO
Summarise the concept of loss absorbency and discuss the main arguments and
considerations for its introduction. Your poster should also cover what types of finance
will be sued (i.e. bail in bonds) and who will actually buy these.

GROUP THREE
Outline the main competition issues which could arise as a result of Vickers proposals
and the government's response.

GROUP FOUR
Summarise the main arguments and treads throughout Ben Bernanke report “Some
Reflections on the Crisis and the Policy Response “Why is new regulation needed?

You have 20 minutes to produce a poster and a further 5 minutes to plan and prepare
your presentation. Each presentation for each sub group should not be more than 10
minutes allowing for time for questions from the class and tutor.

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 Don’t just describe the report – compare to the principles outlined in the lecture and
take a critical approach!
CLASS DISCUSSION QUESTION
What is the Liikanen Group report? How does this differ from Vickers? How is this
similar to Vickers?

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

15
Session Six
Pre-Session Tasks

Complete core reading

Prepare seminar questions

Learning Outcomes
 Outline the key reforms under Basel III
 Discuss key liquidity regulation
 Discuss key capital requirements regulation
 Evaluate the FSA/FCA ethical framework
 Outline the proposed resolution and recovery proposals

Core Reading
Topic 5 articles in the reading pack

Seminar Questions
1. Class discussion: What are the main objectives of banking reform?

2. On the 17th September 2012 the Bank of England published a paper titled “A
practical process for implementing a bail in resolution power” Around the same time
the British bankers association also published a similar paper on resolution and
recovery. Form 4 seminar groups and you will be given some flipchart paper and
pens.

GROUP ONE
Outline why these papers were published and the need to address resolution regimes
for financial institutions.

GROUP TWO
Summarise Bail in practice and the pre-resolution stage. Give examples of when these
powers could have been used in the 2007 financial crisis. Would these powers and
actions have helped or even been able to be implemented?

GROUP THREE
Outline the stabilisation and valuation & exchange stages. Are all of the suggestions
practical? Would they have worked during the 2007 financial crisis? Would ring fencing
have a positive effect?

GROUP FOUR
Outline the prelaunch and restructuring stages – do you feel the assumptions are
realistic?
How easily will the bail in occur and what are the wider consequences of this?
What are the overall implications of this paper?

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 You have 20 minutes to produce a poster and a further 5 minutes to plan and prepare
your presentation. Each presentation for each group should not be more than 6
minutes allowing for time for questions from the class and tutor.

REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

17
Session Seven
Pre-Session Tasks
Complete core reading
Prepare seminar questions

Learning Outcomes
 Understand the role of ethics and moral judgements within financial services
 Appreciate the types of activities and services that are regulated and why a general
prohibition exists
 Evaluate the core ethos of Conduct of Business regulations in the UK

Core Reading
Topic 7 articles in the Reading pack
Watch 'WhistleBlower Banks' documentary available on VOD - Link in the lecture slides.

Additional Reading

Chapter 4 (Integrity & Ethics) & Chapter 10 (Conduct of Business) - FCA Regulation and
Professional Integrity (Professional exam standard book)

Seminar Activities
Ethical Case studies -
 With the person sitting next to you consider the case studies - What should be done
in each scenario.

You have 25 minutes with a 10minute interactive debate.

Form 4 groups:

"Regulation is a waste of time and money"

 2 Groups - Discuss the merits of this statement - Why might this be true. Back your
answer up with facts from the course and key elements of this week's paper on the
FCAs TCF initiative
 2 Groups - Counter this argument - Also based on facts!

You are strongly advised to use this week's discussion articles in addition to those in
previous weeks!

Video documentary - Panorama: Can you trust your bank

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REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

Session Eight
Pre-Session Tasks
Complete core reading
Prepare seminar questions

Learning Outcomes
 Understand the role of financial services organisation preventing financial crime
 Appreciate why this a core objective for regulators to prevent illegal activities
 Discuss some of the ML regulations in the UK
 Discuss the impact of Insider dealing, and market manipulation.

Core Reading
Topic 8 articles in the Reading pack

Additional Reading

Chapter 8 (UK Regulatory Framework relating to financial crime) - FSA Regulation and
Professional Integrity (Professional exam standard book)

Seminar Activities
In class mini - lecture on ML Regulations and Insider dealing

Form 3 Groups -

3 Tables will be set up with an array of resources -

Each Group will have 25 minutes to look through the resources provided to you.
In that time you will:
 Discuss the articles highlighting key points with guidance from your tutor
 Make an A4 resource that can be photocopied and placed on BB for revision
purposes

At the end the class will feedback their key learning and debate differing opinions.

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REMEMBER TO CHECK THE BB FOLDER FOR ARTICLES AND EXTRA RESOURCES

Session Nine
Alternative banking systems and regulation.

Learning outcomes and seminar work to be posted on BB nearer the time.

Session Ten

Prepare for the individual assignment.

Details to be announces on Blackboard.

Glossary
Use this section to write down words you don’t understand and a brief definition.

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 MODULE CODE: 25-7A03-00S

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