Course Details
Course Outline
5 days course
Financial Regulation
- Financial regulation: Is it possible?
- The Bank for International Settlements (BIS)
- The Basel Committee for Banking Supervision (BCBS)
- Minimum Capital Requirements
- Case study: Deutsche Bank (2016)
- Risk-weighted assets and regulatory capital
- The three accords: Basel, Basel II, Basel III
- The three pillars: Pillar I, Pillar II, Pillar III
- The three risks: Credit, market and operational
The Anatomy of the Basel Accords
- Guided tour of the BIS, BCBS and the EBA websites
- Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework (bcbs128).
- Basel III: A global regulatory framework for more resilient banks and banking systems (bcbs189).
- Capital Requirements Regulation (575/2013) (CRR)
- Capital Requirements Directive (2013/36/EU) (CRD)
- EBA Report: On Credit Valuation Adjustment (CVA) under CRR Article 456(2)
- Group Work: A mind map of Basel III
Credit Risk
- What is credit risk?
- The three key elements of credit risk:
- EAD, LGD, PD
- The three approaches:
- The standardized approach (SA)
- The foundation internal ratings based approach (FIRB)
- The advanced internal ratings based approach (AIRB)
- Excel lab: Computing FIRB and AIRB ourselves
- Revisions to the standardised approach for credit risk (d347).
Advanced Credit Risk
- Specific exposures: Derivatives, contingent exposures, securitization, covered bonds
- Credit risk mitigation techniques
- Netting, collateral, credit derivatives
- Counterparty Credit Risk in Basel III
- Credit valuation adjustments (CVA)
- Future developments: Basel IV, FRTB
- Excel lab: The CVA of an interest rate swap
- Review of the credit valuation adjustment risk framework (d325).
Market Risk
- What is market risk?
- The standardized approach (SA)
- The internal models approach (IMA)
- Value at Risk (VaR) and Expected Shortfall (ES)
- Excel lab: The VaR and ES of General Electric Corp.
- Stressed VaR and incremental risk charge
- Minimum capital requirements for market risk (d352).
- Case study: JP Morgan and the London Whale
Operational Risk
- What is operational risk?
- Case study: Societe Generale and Jerome Kerviel
- The basic indicator approach (BIA)
- The standardized approach (SA)
- The advanced models approach (AMA)
- Standardised measurement approach for operational risk (d355).
- Liquidity monitoring tools
- Basel III: The liquidity coverage ratio and liquidity risk monitoring tools (bcbs238).
- Basel III: The net stable funding ratio (d295).
