Risk Management in Banks
INTRODUCTION
Risk management in banking has been transformed over the past decade, largely in response to regulations that emerged from the global financial crisis and the fines levied in its wake. But important trends are afoot that suggest risk management will experience even more sweeping change in the next decade.
This 10 Days course will develop an understanding of the importance of operational risk management within the Banking and Finance industry and build an appreciation for the impact operational risk can have.
The focus is on the practical implication of operational risk, rather than just the theory. To this end real-world examples and case studies are used throughout.
The aim is that participants not only leave with a better understanding of operational risk, but also how better to manage it.
The goal of this course is to understand how risks are categorized, quantified, monitored and managed within banks, and the related regulatory requirements.
OBJECTIVES
By the end of this Risk Management in Banks Course participant will be able to:
Understand the business model of banks in relation to the risks they take
Identify the key banking risks groups and their relative importance .
Learn about the qualitative and quantitative tools for measuring and managing financial risk in banks
Understand the regulation aimed at controlling risk in banks and how it has evolved
Understand the different methodologies used for regulatory capital and liquidity requirements in banks
WHO SHOULD ATTEND ?
The Risk Management in Banks Course is suitable for: Risk managers, regulators, internal auditors, bankers and analysts, Also appropriate for a broader audience who wish to gain a better understanding of risk management processes within a bank and how they are regulated.
It is targeted at an intermediate level and assumes a basic understanding of accounting, financial products and banking functions.
COURSE OUTLINE Day 1
Risk Management
Identifying and defining major risk groups and how they arise in the derivatives business: market, credit, liquidity, operational and reputation
Lessons learned from risk management failures in derivatives
Exercise: Company failures caused by derivatives
Day 2
Analytic Overview
The aim of this section is to introduce the inherent risks of a bank s balance sheet and the need for capital to cover these risks.
Analyzing Banks
Why risk is inherent to a bank s business model and therefore why effective risk management is critical
The balance sheet of a typical bank
The importance of capital
Day 3
Key Risk Areas
Identifying and defining major risk groups: credit, market, liquidity, operational, legal, regulatory, counterparty and reputation
Overview of how much risk banks take in each group and the complexity of the risk
Risk Management Failures
Historical failures in financial institutions
Lessons from the global financial crisis (GFC)
Regulatory changes since the GFC
Day 4
Regulatory Capital in Banks
Regulatory capital
Basel and the three pillars
Overview of minimum capital ratios
Exercise: Analyzing the Pillar 3 report of a large bank
Day 5
Market Risk
This section introduces sources of market risk in the balance sheet and how this risk can be quantified and managed. Finally, the section covers the principles of regulatory capital allocation for market risk.
Definitions and Sources of Market Risk
Defining market risk
Exercise: Defining the magnitude of various market risks
Value-at-Risk (VaR)
Purpose of VaR
Methodologies for calculating VaR
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Trading book and banking book
Standardized approach
Internal models the use of VaR to define regulatory capital
Back testing
Exercise: Market risk disclosures at a global bank
Day 6
Credit Risk
Credit risk is possibly the most important risk faced by most commercial banks. This section explains the nature of credit risk, including the relevant products, types of credit risk, quantification and regulatory capital methodologies.
Identifying Credit Risk
Credit products
Types of credit risk
Credit Risk Indicators
Credit ratings
Credit spreads
Day 7
Mitigating Credit Risk
Contractual mitigates
Securitization and credit derivatives
Exercise: Credit portfolio management in a global bank
Quantifying Credit Risk
Default probability
Loss given default (LGD) and recovery
Default correlation
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Regulatory Capital for Credit Risk
Standardised risk weights
Exposure at default methodologies
Internal rating based (IRB) approach
Exercise: Cost of credit
Day 8
Counterparty Risk
Counterparty risk has grown in significance in recent years. It represents a combination of market and credit risk and is related mainly to OTC derivatives transactions. This section explains the nature of counterparty risk, risk mitigation and how regulatory capital methodologies for credit risk incorporate counterparty risk.
Defining Counterparty Risk
Settlement and pre-settlement (counterparty) risk
The derivatives market
Risk mitigates for counterparty risk
Quantifying Counterparty Credit Exposure
Potential future exposure
Monte Carlo simulation and add-on approaches
Wrong-way risk
Regulatory Capital for Counterparty Risk
Default risk and CVA capital charges
Current exposures and internal model methods
Changes in methodologies and impact of central clearing
Day 9
Operational Risk
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Operational risk was a new risk to be quantified under Basel II, and occurs throughout a bank s business model. This section aims to explore some of the challenges that face banks in controlling, quantifying and allocating regulatory capital to operational risk.
Defining Operational Risk
Sources, categorization and drivers of operational risk
Exercise: Operational risk examples
Causes of operational risk in a bank
Legal and Reputational Risks
Examples of reputational problems
Suitability issues and derivatives
Exercise: Matching risk to description
Regulatory Capital for Operational Risk
Basic indicator approach
Standardized approach
Advanced measurement approach (AMA)
Basel III new Operational Risk Standardized Approach
Day 10
Liquidity Risk
Liquidity risk can be the most acute form of risk facing a financial institution at times of crisis as this is often the means by which providers of bank funding express dissatisfaction with management of other risks (e.g. credit risk). The aim of this section is to explore types of liquidity risk, how these risks are managed and the regulatory requirements faced by banks.
Nature of liquidity risk
Definition
Cause of liquidity risk in banks
Historical liquidity risk in problems
Liquidity Risk in Financial Institutions
Sources of liquidity in banks
Exercise: Bank funding sources
Nature of liquidity risk
Liquidity Risk Regulation
Basel principles for the management and supervision of liquidity risk
Liquidity coverage ratio (LCR)
Net stable funding ration (NSFR)
Exercise: NSFR in practice
IN-HOUSE TRAINING
LPC Training is capable of conducting this training programme exclusively for your delegates. Please e-mail us on admin@lpcentre.com for further information and/or to receive a comprehensive proposal.
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DOCUMENTATION
High-Quality material has been prepared by the LPC team for distribution to delegates. In addition, a special note pad to facilitate note-taking will be provided.
CERTIFICATES
Accredited Certificate of completion will be issued to those who attend & successfully complete the programme.
SCHEDULE
Our Course timings commence at 09:00 and conclude at 13:00.
REGISTRATION & PAYMENT
Please complete the registration form on the course page & return it to us indicating your preferred mode of payment. For Further Information, please get in touch with us.
CANCELLATION AND REFUND POLICY
Delegates have 14 days from the date of booking to cancel and receive a full refund or transfer to another date free of charge. If less than 14 days notice is given then we will be unable to refund or cancel the booking unless on medical grounds. For more details about the Cancellation and Refund policy, please visit www.lpcentre.com/terms-and-conditions/
TRAVEL AND TRANSPORT
We are committed to picking up and dropping off the participants from the airport to the hotel and back.
LONDON
Oxford Street Offices: London - Oxford Street 25 N Row, London W1K 6DJ
+44 (0) 20 36 916 970
West London Office: 47 49 Park Royal Road London NW10 7LQ +44 (0) 20 80 900 464
info@lpcentre.com
DUBAI
Business Bay - Marasi Drive Churchill Tower commercial1, Office 107 +971 52 135 7341
dubai.training@lpcentre.com
KUALA LUMPUR
No. 03-06-05, UOA Business Park, Jalan Pengaturcara U1/51A, Section U1, Kawasan Perindustrian Temasaya, 40150 Shah Alam, Selangor
+60 19-305 5694
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