Risk Management and Basel II
| Duration | 1 Day |
| Level | Advanced |
| Suitable for | All individuals involved in the utilisation of bank capital, including transactors, credit and financial control staff |
| CPD hours | 6 hours |
| Cost |
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| Dates |
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Course Content
· The Basel I Accord
o Background and scope
o Mechanics-definition of capital, provisions & risk weights
o Risk weights, credit conversion factors & return on equity
o Success and limitations
· Credit risk management practices at best practice banks
o Internal credit ratings
o Economic capital
o Expected and unexpected losses
o Rorac /Raroc concepts
o Pricing as a credit issue
o Credit models
o Credit portfolio management
· The Basel II Accord
o Objectives and how the Accord seeks to achieve them
o Credit and operational risk vs. other risks
o The three pillars system
· First pillar-capital requirements
o Credit risk
o The first pillar- minimum capital requirements
o Three approaches: standardised, foundation and advanced
o The risk weight function, PD, LGD and EAD.
o Rules for sovereigns, banks and corporates / retail
o Practical implications for business lines, capital allocation & pricing of transactions-exercises
· Credit risk mitigation
o The different approaches
o What has changed? Impact on deal structuring
· Special credit exposures
o Specialised lending sub-classes
o Rules for equity exposures
o Rules for purchased receivables
o Rules for securitisations
· Market risk
o Changes to the 1996 Amendment
o Capital requirements: general market risk and specific risk
o Standardised approach and VaR models
· Operational risk
o The three approaches
o Qualifying criteria
· Pillar 2 – bank supervision
· Pillar 3 – market discipline
· The 2009 amendments
Learning Outcomes
By the end of the course participants will be able to:
· Unerstand the main risk management issues and techniques and how Basel II approaches them
· Calculate capital requirements, price transactions and calculate returns
· Use credit mitigation techniques to minimise capital and increase returns