FINS3650 International Banking

How FINS3650 is assessed

What FINS3650 covers

FINS3650 runs across ten teaching topics at UNSW, moving from international banking structures and the Basel regulatory framework through country, trade, FX and credit risk, then investment banking, sovereign debt crises, AML/CTF, offshore banking and a capstone on banking crises (GFC, Asian crisis, SVB 2023).

It is assessed through discussion-board participation, a group research report, a mid-session exam and a final exam, so this guide pairs written conceptual answers with worked Basel-ratio and FX calculations.

It runs across ten teaching topics — international banking structures and the Basel regulatory framework, then country risk, trade finance, FX and Eurocurrency markets, investment banking and credit risk, sovereign lending and debt crises, AML/CTF, offshore banking, and a capstone on banking crises (the GFC, the 1997 Asian crisis and the 2023 SVB / Credit Suisse turmoil).

It is a method-and-argument course: some marks come from computing and interpreting a Basel III capital, liquidity or leverage ratio, a country-risk score or an FX cross-rate; most come from a structured written answer that reasons over regulation, risk and a named case.

Assessment on Moodle runs across four components — discussion-board participation (the Topic Insights & Summaries and case-study threads), a group research report, a mid-session exam, and an end-of-term final exam. The final is historically a time-limited paper of about 2 hours plus 10 minutes reading, around 7 questions worth roughly 70 marks, mixing short-answer with short descriptive/essay questions.

The exact component weights are not published in the course materials — they sit behind the Moodle Course Outline tool — so confirm the weighting, the open- or closed-book status and the calculator policy on the FINS3650 course outline. This course sits in Term 2 (T2) on the UNSW trimester calendar, and your result feeds the Weighted Average Mark (WAM) that later finance courses build on.

Worked example · free

Basel III capital adequacy: is the bank compliant?

Key terms

Common Equity Tier 1 (CET1) & the capital ratio

The highest-quality going-concern capital (common shares + retained earnings). A bank's capital ratio = eligible capital ÷ risk-weighted assets. Basel III minima: CET1 ≥ 4.5%, Tier 1 ≥ 6%, Total capital ≥ 8% of RWA, with a 2.5% capital-conservation buffer and a 0–2.5% countercyclical buffer met with CET1 on top.

Risk-weighted assets (RWA)

A bank's exposures scaled by risk weight, so riskier assets consume more capital. Under the revised standardised approach weights vary by rating, by loan-to-value for mortgages, and by exposure type; the Basel III output floor requires total RWA to be at least 72.5% of the standardised-approach figure.

Liquidity Coverage Ratio (LCR)

LCR = high-quality liquid assets (HQLA) ÷ total net cash outflows over a 30-day stress ≥ 100%. It tests whether a bank can survive a 30-day liquidity stress; the Net Stable Funding Ratio (NSFR) is its ≥ 100% one-year structural-funding counterpart.

Country risk & the sovereign ceiling

The risk of loss from political, sovereign, economic, legal or transfer/convertibility problems in a foreign jurisdiction. It is broader than borrower-specific credit risk and sets a ceiling on it: a sovereign downgrade can cascade to the ratings of all local borrowers.

Letter of credit (L/C)

A documentary instrument in which the issuing bank substitutes its own creditworthiness for the importer's and pays the exporter against strictly compliant documents. It runs on the autonomy principle (independent of the sales contract; banks deal in documents, not goods) and standard ICC UCP 600 rules.

FATF 40 Recommendations

The global AML/CTF standard set by the Financial Action Task Force, implemented through customer due diligence (KYC/CDD), transaction monitoring and record-keeping, and enforced by mutual evaluations and grey/black-listing. In Australia, AUSTRAC administers the regime (SMRs, TTRs, IFTIs).

FINS3650 FAQ

Questions students ask in each FINS3650 chapter

What is the difference between a branch and a subsidiary?

A branch is an extension of the parent bank (not a separate legal entity), usually supervised by the home country with capital managed at group level, and it is often restricted from unrestricted local retail deposit-taking. A subsidiary is locally incorporated with its own capital, charter and board, supervised by the host country, and can be resolved locally with better protection for local creditors. The choice drives client mix, regulatory reporting, tax and how a crisis is resolved. Chapter 01 · Foundations of International Banking

Why is international banking regulated?

To protect financial stability (prevent systemic collapse and contagion), preserve market integrity (fair, transparent markets and no race-to-the-bottom regulatory arbitrage), protect consumers, and combat financial crime such as money laundering, terrorism financing and sanctions evasion. The main tools are capital and liquidity requirements, fit-and-proper rules, disclosure, and limits on exposures and risk concentration. Chapter 02 · Banking Regulation and the Basel Framework

What is the difference between the LCR and the NSFR?

The LCR is a short-term test: high-quality liquid assets over net cash outflows in a 30-day stress, ≥ 100%, so the bank survives a month-long liquidity shock. The NSFR is a structural, one-year test: available stable funding over required stable funding, ≥ 100%, so the bank is not over-reliant on short-term wholesale funding to hold longer-term assets. One is about surviving a stress window, the other about a sustainable funding profile. Chapter 03 · Basel III Capital and Liquidity

What is the difference between country risk and credit risk?

Credit risk is borrower-specific — the counterparty's financial health, collateral and history. Country risk is broader: it adds the political, sovereign, economic, legal and transfer/convertibility dimensions of the jurisdiction. Crucially, country risk sets a ceiling on credit risk in that country, so a sovereign downgrade can cascade to the ratings of all local borrowers (the sovereign ceiling). Chapter 04 · Country Risk Management

Who bears the risk under a letter of credit versus open account?

Under open account the exporter ships before payment and bears the most risk; under cash-in-advance the importer pays first and bears the most risk. A letter of credit sits in between and shifts payment risk onto the issuing bank, whose creditworthiness replaces the importer's — the exporter is paid against compliant documents regardless of a later dispute over the goods, because banks deal in documents, not goods. Chapter 05 · International Trade Financing

What is the difference between transaction, translation and economic FX exposure?

Transaction exposure is on known, contracted future cash flows in a foreign currency and is the most directly hedgeable. Translation exposure is an accounting effect from restating a foreign subsidiary's statements into the home currency — it hits reported equity and earnings, not cash directly. Economic (operating) exposure is the change in the present value of future cash flows as FX moves alter a firm's competitiveness, and is the hardest to hedge because it is strategic. Chapter 06 · Foreign Exchange and Eurocurrency Markets

Why did such a small asset move threaten Lehman's solvency?

Because it was leveraged around 44:1 (assets to tangible common equity). At that leverage a 1% fall in asset values wipes out roughly 44% of equity and nearly doubles the leverage multiple, so a decline of only a little over 2% would erase the equity entirely. Thin equity plus very high leverage makes solvency hyper-sensitive to tiny asset-value moves — the fragility a leverage ratio is designed to limit. Chapter 07 · International Investment Banking Services

What is expected loss and how is it calculated?

Expected loss is the probability-weighted loss on a credit exposure: EL = PD × LGD × EAD, where PD is the probability of default, LGD the loss given default (the fraction not recovered) and EAD the exposure at default. Because it is a simple product, expected loss scales linearly with each input, so doubling the PD doubles the expected loss. Under IFRS 9 banks provision 12-month ECL for performing exposures and lifetime ECL once credit risk has increased significantly. Chapter 08 · Credit Risk Management in Banks

Why can a sovereign default be harder to resolve than a corporate default?

Because there is no bankruptcy court with jurisdiction over a sovereign, so creditors cannot seize a country's assets the way they can a company's. Resolution depends on negotiation, and repayment turns on both ability and willingness to pay. Holdout creditors can refuse a deal and litigate (as in Argentina), which is why collective action clauses were introduced to bind a dissenting minority to a supermajority restructuring. Chapter 09 · Sovereign Lending and Debt Crises

What are the three stages of money laundering?

Placement — introducing illicit cash into the financial system, often broken into small amounts (structuring) to avoid attention. Layering — moving the funds through complex transactions, such as chains of shell-company accounts across jurisdictions, to obscure the audit trail. Integration — bringing the funds back into the economy as apparently legitimate wealth, for example by buying property or a business. Chapter 10 · AML/CTF and Financial Crime

What is regulatory arbitrage in banking?

It is structuring activity to exploit differences in regulation or tax across jurisdictions — for example booking profit or risk in a lightly regulated, low-tax offshore venue while the real economic substance stays onshore. It can be legal, but it distorts where risk appears to sit, creating supervisory blind spots, and it is the mechanism behind much offshore booking, shadow-banking growth and off-balance-sheet SPV structures. Chapter 11 · Offshore Banking and Regulatory Arbitrage

Why did SVB fail so quickly in 2023?

Three channels combined. Its deposits were concentrated in a narrow, interconnected and largely uninsured client base; the inflows were invested in long-dated bonds carrying interest-rate risk in the banking book, whose unrealised losses were hidden by held-to-maturity accounting until a sale forced recognition; and a fast, social-media-amplified run on un-sticky internet deposits forced a fire-sale that crystallised the losses. A 2018 threshold rise had also exempted it from the full liquidity ratios and rigorous stress tests. Chapter 12 · International Banking Crises

How should I structure a short-essay answer in the FINS3650 exam?

Use a consistent template: define the concept precisely, apply it to the specific scenario, illustrate with a named case study from the course, and conclude with a clear judgement. This beats listing facts because the exam rewards structured reasoning that connects a risk to its regulation and a real example. Keep each part tight so you can answer all the questions in the time available. Chapter 13 · Exam Preparation and Synthesis

How to study for the exam

Treat FINS3650 as two linked skills rather than one reading course, and rehearse both weekly rather than cramming at the end of term.

First, drill the handful of genuine calculations until they are automatic: the Basel III capital stack (CET1/Tier 1/Total ratios against minima plus the 2.5% conservation buffer), the LCR and ≥ 3% leverage ratio, the ICRG composite country-risk score (CPFER = 0.5 × (PR + FR + ER)), an FX cross-rate, expected loss EL = PD × LGD × EAD, and the sovereign debt-dynamics identity Δ(debt/GDP) ≈ (r − g)(debt/GDP) − primary balance — always with correct units and a sanity check.

Second, practise the written task shapes the exam and the discussion board reward: decompose a country vignette into its five risk components, argue a branch-versus-subsidiary structuring decision, diagnose a crisis (Lehman leverage, SVB funding concentration and IRRBB) across its transmission channels, and map a risk type to its Basel or regulator tool.

Build a one-page grid linking each risk (credit, market, country, operational, liquidity) to its regulatory response (Basel III capital/liquidity, FATF, APRA/ASIC/RBA/AUSTRAC) and a signature case, because the paper rewards fast, structured recall under time. Post to the Topic Insights & Summaries and case-study threads every week — it is graded and it rehearses exactly the concise argument the exam needs.

When a step won't click, ask Sia to explain that single step a different way and set you a fresh practice question in the same style; it teaches the method and checks your reasoning, and it never substitutes for your own graded work. Confirm the exam date, room, weighting and open/closed-book status on the FINS3650 course outline and the UNSW exam timetable.

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