FE6057ES | International Banking

Summative Assessment 1: Individual coursework (100% of module mark)

Introduction

Summative Assessment:
The performance of students is assessed by the assessment methods as appropriate to the
level and learning outcome of the assessment protocol. The individual coursework
assignment constitutes 100% of the assessment for this module. Students are required to
write an individual coursework (minimum 1600 words; maximum 2000 words) on two
questions from three.
Submission Instructions: submit via 'Online Submission' under the name of '001 Individual
Coursework (2000 words)' to ELMS.
Assessment Instructions:
 Answer TWO from THREE questions. All questions carry equal marks.
 Minimum word limit for each question: 800 words
 Maximum word limit for each question: 1000 words
 Maximum word limit for the individual coursework: 2000 words
 Show the number of words for each question at the end of each answer.
 End-references and appendices are not included in the word count.

FE6057ES | International Banking

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Question 1:
Deregulation, technological change, Internationalization and globalization, increased
competition have recently profoundly changed the banking business, moving from a narrow
activity to full financial services firms.
a) Define universal banking and discuss the impact of a legislation/deregulation on the
banking activities of a universal bank (use examples).
b) In the light of the ongoing turmoil in financial markets, discuss whether large bank
mergers are motivated by exploiting safety-net subsidies (implicit too-big-to-fail
guarantees) and support your arguments with two pieces of evidence.

Question 2:
The processes of deregulation, globalisation and conglomeration have offered productive
opportunities for banks in terms of profitability and value creation activities but have also
posed serious risk challenges. The financial crisis in 2007-08 demonstrated on one hand the
fragilities of the banking sector globally and, on the other, the potential systemic risks
associated with the interconnectedness of banking activities. Critically discuss the various
banking risks applicable to modern banks (a minimum of four types of risk) and highlight the
importance of the interrelation among these risks (use examples to support your
arguments).

Question 3:
“Bitcoin originated with the white paper that was published in 2008 under the pseudonym
“Satoshi Nakamoto.” It was published via a mailing list for cryptography and has a similar
appearance to an academic paper. The creators’ original motivation behind Bitcoin was to
develop a cash-like payment system that permitted electronic transactions but that also
included many of the advantageous characteristics of physical cash” (Berentsen and Schär,
2018, pp.1).
a) Evaluate the scalability and value of Bitcoin versus physical monetary unites like gold
and currencies (e.g., USD and GBP) and the desire to develop digital cash.
b) Critically discuss the potential to moderate the volatility/speculative bubbles in
Bitcoin and debate whether Bitcoin could overturn world currency order.

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Reference:
Berentsen, A. and Schär, F., 2018. A short introduction to the world of cryptocurrencies. FRB
of St. Louis Working Review, First Quarter, 100(1), pp. 1-16. Available:
https://doi.org/10.20955/r.2018.1-16.

(Suggestions: students could begin your arguments/analysis by considering a simple cash

transaction or undertake an event study – this may include Bubble/Crash or Bitcoin
transaction graphs)

It is recommended to write your coursework with the structure of:

 Cover Page with Module Code and Name, Assessment Type, Student ID (not your
name - anonymous submission), Date for Submission, Word Counts (Cover sheet is
attached)
 Introduction
 Main Body used for answering these questions (recommend using subheading(s) for
each question)
 Conclusion
 Reference/Bibliography
 Appendix if needed – not compulsory.

Tips:

 Individual coursework is at a minimum 1600 words and a maximum 2000 words

(including in-text references, but excluding end-text references, tables, figures,
Appendix).
 The coursework will require students to use information from academic literature to
demonstrate understanding of major conceptual and practical problems.
 As should be obvious from the above, there is a requirement for you to research,
collect, present and analyse actual data. Sources of information must be included
and referenced in your discussion as well as the date obtained.

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 Points and/or arguments presented and made should be substantiated with
data/evidence. It is required to provide your own views, but it should be clear
through the referencing system whether they are personal or evidenced by the
views/data of others.
 A reference or bibliography should be included using the Harvard system. This at
least entails that every reference included in the bibliography is referenced in the
main body of the text and that there are no references included in the bibliography
that are not mentioned in the main body.
 Academic Misconduct covers a variety of practices, such as:
- Clarity of expression - please pass through MS Word ’Spelling & Grammar’ or
equivalent.
- Academic integrity requires honesty in your studies. You should not present
another person’s sentences or ideas as your own work. You should clearly
identify quotations through the use of quotation marks and references to the
sources. Failure to adhere to these academic standards may lead to allegations of
Academic Misconduct, which will be investigated by the Student Casework
Office.
- Academic Misconduct covers a variety of practices, such as:
- Plagiarism: copying another person’s ideas or words and presenting them as
your own work, without the use of quotation marks and/or references.
- Self-plagiarism: resubmitting, in part, or in entirety one of your assignments for
another piece of work; Inventing, altering or falsifying the results of experiments
or research.
- Commissioning or contracting another person to complete an assessment.
- Colluding with others in the production of a piece of assessed work which is
presented as entirely your own work.
- Cheating in an exam (for example, but not limited to taking revision notes into
the exam room or copying off another student during an exam).

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Assessment Criteria:
 Evidence of understanding of relevant concepts.
 Critical application of theory.
 Demonstration of analytical independent thinking.
 Evidence of research.
 Use of relevant examples to support the argument.
 Collection and sound use of relevant information.
 A coherently structured argument.
 Well supported conclusions.
 A sound professional quality presentation

Note: Please find the attached assignment coversheet

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 London Metropolitan University
Bachelor of Business Administration Top-up
Cover Sheet

STUDENT LMU ID NUMBER 0 0 1 7 6 1 8 2

MODULE CODE FE6057
DEADLINE 21.05.2023
MODULE TITLE INTERNATIONAL BANKING
ASSIGNMENT NUMBER 01
TUTOR'S NAME MR SUGATH NANDASIRI
TEACHING BUILDING COLOMBO BRANCH
STUDENT NAME P KAVEESHA D FERNANDO
STUDENT DECLARATION ''I declare that the work submitted is my own"
Signature of the student:[email protected]
Date Submitted: 21.05.2023

PLAGIARISM is covered by the university’s regulations on Academic Misconduct; sources

of academic misconduct in coursework can include fellow students, published sources
including internet, essay banks and other commissioned and non-commissioned sources.
(See http//www.londonmet.ac.uk/academic-regulations/misconducts-1.cfm)

GUIDELINES FOR THE SUBMISSION OF COURSEWORK

• Students are advised to keep a copy of every assignment

• You must complete Sections of this cover sheet and signed the declaration. This
completed cover sheets should be attached to your work. Work will not be accepted
without a cover sheet.
• Coursework deadlines will be priory informed to students
• Late work – you may only submit coursework up to two weeks after the deadline date. A
coursework assignment which is not submitted by the due date will normally be regarded
as a non-submission unless Mitigating Circumstances for late submission are accepted.
You will need to supply documentary evidence of the reason for your failure to submit by
the due date.

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 Acknowledgment

First special thanks to with all respect and gratitude to our module lecturer
Mr. Sugath Nandasiri for constant support and practice.

I acknowledge the support of our parents and siblings.

Finally, I would like thank to everyone those who supports me to do this report!!

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 Table of Content

Question 1
Introduction……………………………………………………………………………….. 9
Universal Banking………………………………………………………………………… 9
Impact of a legislation/deregulation on the banking activities of a universal bank………. 10
Deregulations and legislations in the UK and other countries……………………………. 10
Full Financial Services provided by the banking sector with the deregulations………….. 11
Uncertainty in the current financial markets……………………………………………… 12
Various safety-net subsidies available to large banks in engage in financial activities…... 12
Mergers and acquisitions of banking industry……………………………………………. 13

Question 2
Crypto – Currency………………………………………………………………… 14
Similarities between general currency and crypto currency………………………. 14
Differences between general currency and crypto currency………………………. 14
Scalability of bitcoin and physical currency………………………………………. 15
Value of bitcoin and physical currency………………………………………….... 15
Possibility of developing crypto currency as a common medium exchange……..... 15
Speculative bubble when it comes to bitcoins……………………………………... 16
Possibility to occur bubbles in bitcoins………………………………………….... 16
How could bitcoin overturn world currency order taking……………………….... 16
References…………………………………………………………………………. 17

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Question 1:
Deregulation, technological change, Internationalization and globalization, increased
competition have recently profoundly changed the banking business, moving from a narrow
activity to full financial services firms.

Deregulation is the reduction or elimination of government regulations and restrictions in

specific industries or sectors to promote competition, efficiency, and innovation.
Technological advancements have revolutionized industries and business models, leading to
increased productivity, efficiency, and new opportunities. Globalization has been facilitated
by advances in transportation, communication, and trade liberalization. Increased competition
can lead to more choices, lower prices, and improved quality for consumers, but can also lead
to market consolidation, market failures, and the erosion of small businesses.

Universal banking
Universal banking refers to a banking model that combines commercial banking activities with
investment banking. Universal banking is a term for banks that offer a variety of comprehensive
financial services, including both commercial banking and investment banking services
(Investopedia). According to Market Business News 2023, a universal bank is a bank that combines
the three main services of banking under one roof. The three services
are wholesale banking, retail banking, and investment banking
It combines the three main services of banking under one roof, including wholesale banking,
retail banking, and investment banking. Universal banks offer a comprehensive range of
financial services that go beyond traditional commercial banking activities, such as
investment advisory services, underwriting of securities, wealth management, insurance
coverage, and foreign exchange services. This unique feature of universal banking facilitates
cross-selling opportunities, where a bank can promote and offer multiple products and
services to its existing customer base.

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Impact of a legislation/deregulation on the banking activities of a universal bank

Several recent development factors in the banking sector have influenced the landscape of universal
banking. Here are some key factors:
Technological Advancements: Universal banks have had to adapt to technological
changes by investing in digital infrastructure and offering seamless online banking
experiences to stay competitive. Digital banking, mobile payments, and online
platforms have transformed the way customer’s access and utilize financial services.
Regulatory Changes: Regulating changes have had a significant impact on the banking
sector, particularly in the aftermath of the 2008 financial crisis, requiring increased
capital requirements and reporting obligations for universal banks.

Deregulations and legislations in the UK and other countries

1. United Kingdom (UK):

Deregulation: The UK has implemented various deregulation measures in different sectors.
For example, in the financial sector, the Financial Services and Markets Act 2000 introduced
significant regulatory changes and established the Financial Conduct Authority (FCA) and the
Prudential Regulation Authority (PRA) to oversee the industry.
Legislation: In recent years, the UK has introduced several significant legislations, such as the
Data Protection Act 2018, which implemented the EU's General Data Protection Regulation
(GDPR) into UK law. The Companies Act 2006 is another important legislation governing
company formation, management, and reporting obligations

2. United States:
Deregulation: Deregulation efforts in the United States have occurred in various sectors. In
finance, the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in
response to the 2008 financial crisis, aimed to strengthen regulation and oversight of the
financial industry.
Legislation: The United States passes numerous federal laws covering a wide range of areas.
Some significant legislation includes the Tax Cuts and Jobs Act of 2017, which implemented
tax reforms, and the CARES Act and American Rescue Plan Act, which provided economic
stimulus and relief in response to the COVID-19 pandemic.

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 3. European Union (EU):
Deregulation: The EU has implemented deregulation measures across member states in
various sectors. For example, the EU Single Market initiatives aim to harmonize regulations
and remove barriers to trade and services within the EU. Financial services have also been
subject to regulatory changes, such as the Markets in Financial Instruments Directive (MiFID)
and the Payment Services Directive (PSD), which aimed to enhance competition and
consumer protection.
Legislation: The EU has enacted numerous legislations that impact member states. For
instance, the General Data Protection Regulation (GDPR) introduced a harmonized
framework for data protection across the EU. The EU also introduces directives and
regulations in areas such as consumer rights, environmental protection, and competition law,
among others.

Full Financial Services provided by the banking sector with the deregulations
With deregulations in the banking sector, financial institutions have expanded their range of
services beyond traditional commercial banking activities.
1. Commercial Banking Services:
Deposits: Accepting and holding deposits from individuals and businesses in various
types of accounts such as savings accounts, checking accounts, and time deposits.
Lending: Providing loans and credit facilities to individuals, businesses, and
institutions for various purposes, including consumer loans, mortgages, working
capital loans, and business expansion financing.

2. Investment Banking Services:

Capital Markets: Assisting companies in raising capital through underwriting services
for initial public offerings (IPOs), follow-on offerings, debt issuances, and other
capital market activities.
Mergers and Acquisitions (M&A): Advising clients on mergers, acquisitions,
divestitures, and corporate restructuring, providing valuation analysis, due diligence,
and transaction execution services.

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Uncertainty in the current financial markets

The current financial markets are characterized by various sources of uncertainty. Here are
some key factors contributing to the uncertainty:
Economic Uncertainty: Economic uncertainty arises from factors such as geopolitical
tensions, trade disputes, policy changes, and global economic conditions. For
example, political instability, conflicts, or changes in government policies can create
uncertainty and impact investor confidence
Monetary Policy and Interest Rates: Uncertainty can arise from central banks'
decisions regarding monetary policy and interest rates. Changes in interest rates can
affect borrowing costs, investment decisions, and overall economic growth.

Examples for mergers and acquisitions of the banking industry in the UK and
other countries

Here are some examples of mergers and acquisitions (M&A) in the banking industry in the UK and
other countries:
UK Examples:
Lloyds TSB and HBOS: In 2008, Lloyds TSB acquired HBOS (Halifax Bank of Scotland) in a deal
facilitated by the UK government. The merger created Lloyds Banking Group, one of the largest
banks in the UK at the time.
RBS and NatWest: In 2000, the Royal Bank of Scotland (RBS) acquired NatWest, a major UK bank.
The deal was one of the largest bank acquisitions in British history, resulting in the creation of a
significantly larger banking group.

International Examples:
BBVA and Banco Sabadell (Spain): In 2020, Banco Bilbao Vizcaya Argentaria (BBVA) announced a
merger agreement with Banco Sabadell. However, the deal fell through due to challenges related to
the COVID-19 pandemic and other factors.
JPMorgan Chase and Bear Stearns (United States): In 2008, JPMorgan Chase acquired Bear Stearns, a
global investment bank and brokerage firm. The acquisition was facilitated by the US government to
prevent the collapse of Bear Stearns during the financial crisis.

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Various safety-net subsidies available to large banks in engage in financial
activities

Large banks may have access to various safety-net subsidies that can provide support and protection
for their financial activities. Here are some examples of safety-net subsidies available to large banks:
Deposit Insurance: Many countries have deposit insurance schemes in place to protect bank
depositors in the event of a bank failure. These schemes typically provide a guarantee that
individual deposits up to a certain limit will be repaid even if the bank fails.
Access to Central Bank Facilities: Large banks often have direct access to central bank
lending facilities, such as discount windows or repurchase agreements (repos). These facilities
provide banks with short-term liquidity in times of financial stress or when there is a shortage
of funding.

(Word Count 1000)

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Question 2:
“Bitcoin originated with the white paper that was published in 2008 under the pseudonym
“Satoshi Nakamoto.” It was published via a mailing list for cryptography and has a similar
appearance to an academic paper. The creators’ original motivation behind Bitcoin was to
develop a cash-like payment system that permitted electronic transactions but that also included
many of the advantageous characteristics of physical cash” (Berentsen and Schär, 2018, pp.1).

Crypto – Currency
Crypto-currency is a form of digital or virtual asset that uses cryptography for secure financial
transactions, control the creation of additional units, and verify the transfer of assets. Bit coin is the
most well-known crypto-currency, and its success has led to the development of thousands of other alt
coins. Crypto-currencies are decentralized and transparent, allowing for direct peer-to-peer
transactions. However, they are highly volatile and speculative investments, and their value can
fluctuate dramatically. It is important to conduct thorough research and exercise caution when dealing
with crypto-currencies.

Similarities between general currency and crypto currency

The most important details in this text are the similarities between traditional fiat currencies and
crypto-currencies, such as the medium of exchange, store of value, unit of account, transferability, and
value determination. However, there are also significant differences between the two, particularly in
terms of their underlying technology, regulatory frameworks, and centralization/decentralization.
These similarities are broad and there are significant differences in terms of their underlying
technology, regulatory frameworks, and centralization/decentralization.

Differences between general currency and crypto currency

General currency is typically issued and regulated by a central authority, while crypto-currencies are
decentralized and operate on a distributed network of computers without a central authority
controlling them. General currency is recognized as legal tender and is issued and controlled by
central banks and governments, with the authority to regulate the money supply, implement monetary
policies, and intervene in the financial system when necessary. Crypto-currencies are created through
mining or distributed through ICOs, and their control over the creation and issuance is often governed
by predetermined algorithms or consensus mechanisms. They offer varying levels of privacy and
anonymity, transaction speed and cost, stability and volatility, and regulatory oversight. These
differences are generalizations, and different countries may have different approaches and regulations
regarding their use and acceptance.

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Scalability of bit coin and physical currency
The scalability of Bit coin and physical currency differ significantly due to their underlying systems
and mechanisms. Physical currencies can be scaled by printing more money or minting additional
coins, while Bit coin's scalability is governed by its design and the rules of its underlying block chain
network. Bit coin has faced challenges due to the limited block size and capacity of its block chain,
and has implemented scaling solutions such as Seg Wit and the Lightning Network to increase
transaction capacity and efficiency. However, the scalability of Bit coin in terms of transaction
throughput and speed remains an ongoing challenge that the Bit coin community continues to work
on.

Value of bit coin and physical currency

The value of Bit coin and physical currency differ in several aspects, such as value determination,
volatility, and global acceptance. Physical currencies are primarily determined by economic factors,
while Bit coin is primarily determined by market forces. Physical currencies are more stable than
crypto currencies due to central banks and monetary policies, while Bit coin does not have legal
tender status in most countries. Bit coin's acceptance as a form of payment varies widely, with
physical currencies being more portable and accessible than Bit coin. Physical currencies are designed
to maintain a stable value over time, while Bit coin's value is less stable and can be subject to rapid
price changes. The value of both currencies is subjective and can vary depending on individual
perspectives, market conditions, and global economic factors.

Possibility of developing crypto currency as a common medium exchange

Crypto currencies have the potential to become a more common medium of exchange due to increased
adoption, cross-border transactions, financial inclusion, and technological advancements. However,
they still have some weaknesses that need to be addressed for widespread adoption, such as volatility.
This could lead to increased liquidity, wider acceptance, and improved infrastructure for transactions.
Crypto currencies offer potential benefits, but addressing their weaknesses is essential for wider
adoption and integration into the global financial ecosystem. They face volatility, scalability
challenges, regulatory uncertainty, and user experience and security risks. Technology advancements,
regulatory frameworks, and user acceptance are necessary to address these challenges.

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Speculative bubble when it comes to bit coins
A speculative bubble, also known as a price bubble or asset bubble, occurs when the price of an asset,
such as Bit coin, rises rapidly and exceeds its intrinsic value, driven primarily by investor enthusiasm
and expectations of future price appreciation. The Bit coin market has experienced several notable
speculative bubbles throughout its history, such as 2013's $1,200 rally, 2017's $20,000 surge, and
2020's $65,000 rally. These examples demonstrate how speculative bubbles can result in rapid price
increases followed by sharp declines as the market corrects itself. Investors should exercise caution
and conduct thorough research when participating in markets susceptible to speculative bubbles.
Understanding the underlying fundamentals, market dynamics, and potential risks is essential for
making informed investment decisions.

Possibility to occur bubbles in bit coins

The possibility of speculative bubbles in Bit coin can be attributed to several factors, such as limited
supply and scarcity, volatility and price discovery, network effect and FOMO, lack of intrinsic value
and uncertain future, market manipulation and excessive optimism, and legitimate factors such as
increased adoption, technological advancements, and fundamental value. It is important to assess the
underlying factors and distinguish between speculative bubbles and sustainable growth.

How could bit coin overturn world currency order-taking

Bit coin is theoretically possible to become a global currency, but there are several challenges and
considerations to take into account. Adoption and acceptance would be necessary, as it would require
individuals, businesses, and governments worldwide to recognize and use Bit coin as a medium of
exchange and store of value. Scalability and transaction speed remain a significant challenge, as the
current Bit coin network has limitations in terms of transaction throughput and speed. Volatility and
stability are also obstacles to its adoption as a global currency, as extreme price fluctuations make it
less suitable for stable and predictable commerce. Mitigating Bit coin's volatility would require
increased liquidity, reduced speculation, and the development of robust hedging mechanisms.
Regulatory challenges such as anti-money laundering, terrorism financing, tax evasion, and consumer
protection would be essential for widespread adoption. Infrastructure and accessibility would require
significant investment and technological advancements, and geopolitical considerations such as
overturning the existing global currency order and replacing it with Bit coin would have far-reaching
geopolitical implications. CBDCs, digital representations of fiat currencies issued by central banks,
are being explored by various countries as a means to leverage technology while maintaining control
and stability within the existing currency framework.

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 (Word Count-1000)

References

Investopedia. investopedia.com [Online] Investopedia. Available from:

https://www.investopedia.com/terms/u/universalbanking.asp#:~:text=our%20editorial
%20policies-,What%20Is%20Universal%20Banking%3F,some%20European%20countries%2C
%20including%20Switzerland [Accessed 20 May 2023]

News, M B. (2023) marketbusinessnews.com [Online] Market Business News.

Available from: https://marketbusinessnews.com/financial-glossary/universal-bank/
[Accessed 20 May 2023]

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