ASSIGNMENT GLOBAL BANKING JUNE 2011-05-08 SECTION A BALANCE OF PAYMENTS: Question 1: (30 marks) What is the balance of payments

account of a country? Describe the 3 parts of the account and list the items recorded in each part. Download and print the current A/C balance as a % of GDP for the period 1975 2010 for the USA. explain how the USA was able to run a current a/c deficit for almost 30 years continuously. Explain how the balance of payments could affect the exchange rate of a currency against the other currencies. What tools are available to a government to control the volatility of the exchange rate of its currency against other currencies? EXCHANGE RATES: Question 2: (20 marks) Explain the purchasing power parity (ppp) and interest rate parity (irp) of exchange rates. Using the interest rate parity, express the forward exchange rate of against $ in t years time, as a function of spot exchange rate and the interest rates of the two countries. The current exchange rate between and $ is given as 1 = $1.70. the annual interest rates are 3% and 1% in the USA. You may assume that the rates will remain unchanged for the next few years. Calculate the future exchange rate of against $ 1) after 1 year 2) after 3 years 3) after 6 months. State your assumptions. The USA increases the interest rate suddenly to 2% p.a. what affect will it have on the vs $ exchange rate in the short term and in the long term? Explain you answer. (section A = 50 marks) SECTION B Regulation(50 marks) question 1: Regulation of global banks the regulation of financial markets in general and of banks in particular has always been controversial issue. The banking sector is undoubtedly the most heavily been regulated sector in many countries. Inspite of these tight regulatory systems the world has witnessed many financial crises and major bank failures. Describe the rationale for regulating banks and financial markets. Identify the different types of regulation and discuss the limitations of regulation. (25 marks) Question 2: Regulation financial services industry (UK) The regulatory system of the uk banking and financial services industry has changed dramatically since the big bang in 1986.

Describe the major changes that have taken place in the regulatory environment since then. also describe the current system in detail. What are the effects of changes that are taking place in the system in the last two years? (25 marks) (section b = 50marks) (total = 100 marks) Marking criteria Global banking Introduction and organisation * the study must be clearly structured and presented. * the introduction must state an aim and explicitly identify the relevant arguments and areas to be addressed. * these areas, once identified must be followed up logically in the main body of the study. * there must be a firm conclusion of the areas discussed. content * the contents must be clearly relate to the area of study and the learning 5 0-1 2-3 4-5 * Excellent structure presentation and coherence at an outstanding standard. * evidence of critical discussion.

* some attention paid * good to the structure and structure organisation/coherence. presentation and * evidence of coherently discussion. expressed. * widely discussed.

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0-14 * addressed the aims of the area of the study with some originality and creativity. * applied to practice.

15-24 * clearly relevant.

25-35 * relevance to practice and the module * original and learning creative. outcomes are crystallized

outcome s being tested * knowledge and understanding must be applied to practice.

* does not meet all the theoretical learning outcomes.

*application and integration of knowledge to practice. *meets all theoretical learning outcomes.

within the study. *application of theory to practice, and practice to theory is contextualised appropriately.

Literature

1 5

0-4 *limited of academic literature/research evidence

5-9 *moderate range but depth and complexity appropriate to area of study.

10-15

* the study must demonstrate an appropriate use of academic literature/research, which is appropriate to the study Referencing 5 * all key sources must be cited and a consistent and accurate use of Harvard referencing system must be maintained.

0-2 * main key sources cited. * limited or no use of an accepted referencing system.

* extensive range , depth and complexity ,which is appropriate to the area of study. 3 4-5 * most * all key sources sources cited using cited. an * accepted consistent referencing and system. accurate of an accepted referencing system.