1. Introduction

2. First Day Introduction  Course  Simulation  Introduction

3. Course Introduction  Syllabus –Course Description –Required Resources –Grading –Tentative Schedule

4. Simulation  Stanford Bank Game –Simulated Bank Operation –Management Team Experience

5. Simulation  Concentration on: –Mechanics: Capital, Cost of Funds, Maximizing Fee Income –Management: People Issues, Time Management and Delegation, “Stick- with-it-ness” and what to do when “you really don’t know” and that’s ok!

6. Banking Fundamentals  SPREAD: Investment Return – Cost of Funds Investment Return mainly from Loans and Securities Cost of Funds mainly from Capital and Borrowed Funds

7. Banking Goals  Profitability (Not Size!) –Spread  4% + –ROA  1-1.5% –ROE  12% +  Solvency –Capital to Assets 7-8% (No More, No Less)

8. Financial Institutions  Commercial Banks  Investment Banks  Savings and Loans  Credit Unions  Insurance Company  Mutual Fund

9. Commercial Banks  “Accept Deposits and Make Loans” –But Also FDIC Insured & Fed Regulated  Global/International/Money Center –Chase  Full Service –BankAmerica  Retail/Consumer –Citizens  Limited Purpose / Mono-line –Credit Cards, Ag Loans

10. Bank Services  Payments  Intermediation  Other Services –Guarantees –Insurance –Securities –Trust –Other Fin’l Svcs we will discuss

11. Bank’s Main Activity  Maximize Shareholder Wealth –By managing Credit, Interest Rate, Liquidity, Operational, Capital and Fraud Risk –Subject to constraints from Market Competition, Social structures and Regulatory requirements

12. Assignment for Next Time  Go to Class Webpage (Syllabus)  Go to Apr 5 th entry  Click on, print and bring to class Y1Q4Output.pdf