738N1 Institutions in the Global Financial Market

738N1 Institutions in the Global Financial Market

ASSESSMENT QUESTION

In order to prevent another systemic meltdown, British economist Sir John Vickers – who in 2010 became chair of the Independent Commission on Banking – and former Federal Reserve Chairman Paul Volcker have proposed new regulations on the UK and US banking industries respectively. Although both of them have highlighted the importance of separating commercial banking and investment banking, they adopted different approaches to promote the distinction.

One of the most significant differences in their approaches is the ban on proprietary trading in banks. The Volcker approach centres around the notion of prohibiting the high-risk activities of proprietary trading, while the Vickers approach tolerates banks’ proprietary trading as it is “too complicated to police”.

“Volcker draws the line in a very difficult, almost excruciatingly difficult, place,” Vickers said. “People at the top of banks themselves have not known what was going on in terms of the kind of trading, and the regulator is at a disadvantage relative to them.”

Please answer ALL of the following questions:

• What is your opinion on prohibiting banks from engaging in proprietary trading? Discuss it with specific reference to your knowledge of banks.
• Critically discuss how the largely unregulated hedge funds interact with the heavily regulated financial institutions.
• In your opinion, should regulations be designed to lower the probability of financial institutions’ failures or lower the social costs of financial institutions’ failure? Critically discuss your answer with appropriate support from the literature.

Coursework Guidelines

• The assessment for 738N1 Institutions in the Global Financial Markets module is by this coursework, hence this coursework is worth 100% of the overall assessment of the module.
• Your coursework should clearly demonstrate analytical, critical, and evaluative skills in addressing all the course related questions.
• This coursework consists of THREE questions. Candidates should attempt ALL questions.
• The total mark of the coursework is 100 marks; Marks are equally divided among the three questions.
• Evidence is expected of a wide background of reading and research, without which above average grades are unlikely. All references should be acknowledged (see Library handout on reference styles – Harvard approach is strongly recommended). Good standards of written English and presentation are expected and marks will be deducted if such standards are not met. Given the short length of the essay, a separate introduction and conclusion are not necessary.
• In summary, this coursework should: (i) address in depth the three questions raised; and (ii) find both theoretical and empirical supports to your arguments.
• Please note that this is NOT a group exercise. You may receive reduced or no marks if there are strong similarities between the work handed in by two or more people.
• The coursework should be typed on A4 paper, Times New Roman, 12 point font, aligning text to both left and right margins, double spacing and should be no more than 2,000 words excluding the reference page(s), bibliography and appendices (if applicable).
• Marks will be deducted for excessively short or lengthy coursework (with +/-10% of this word count). Separate word counts should be displayed on the opening cover of each individual coursework.
• The coursework should have attached the official cover sheet with the student number, course, module number and title. Please keep a copy of the coursework for your own records.
• Note that your coursework is to be submitted electronically via Canvas. Please check for the deadline of submitting your work on Canvas module site (under “Assignments” section). For more information regarding the deadline or issues on submitting your work,

please        check   with     the       PG       School             office (at        this       email: Businessaccountingfinance@sussex.ac.uk).

• Upload your word (or pdf) document through the “E-submissions” link on the module’s Canvas site by the deadline.
• Late submissions will be treated according to university regulations. More information on assessment regulations can be found here:

http://www.sussex.ac.uk/adqe/standards/examsandassessment/esubmission