Bank Capital Adequacy Under Basel III Course

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Bank Capital Adequacy Under Basel III Course

Course Overview:

The objective of the course on Bank Capital Adequacy under Basel III is to achieve a more website-oriented vision in regard to the historical development and application of Basel’s capital adequacy regulations and its relevance to banking business.

The target audience will be able to implement regulatory capital, risk-weighted assets and capital adequacy ratios specific to the banks as per the requirements of Basel III.

This course will include the instituting bodies of the Basel regulations, the three pillars of the Basel framework, and the risks banks are still exposed to while in the regulation. It includes credit, market and operational risks and also advanced level approaches to credit risk and market risk measurement. Delegates will also study the tools of regulation of basel III, including, but not limited to, liquidity coverage ratios and risk metrics such as CVA and VaR.

The course should be taken by risk managers, auditors, bankers and analysts who would want to understand more the concepts of capital requirements and why it is so crucial for the banking industry to attain them.

Course Objectives:

At the end of The Bank Capital Adequacy Under Basel III training course, you will be able to:

Explain the purpose, principles, evolution and application of the Basel Capital Adequacy regulations and what is required in terms of:

regulatory capital
risk weighted assets
Capital Adequacy ratios

Enable participants to apply the Basel Capital Adequacy rules to specific banks
Understand how the institutions of the Basel Committee for Banking Supervision (BCBS) and the European Banking Authority (EBA) operate and what the shape of future European banking regulation will look like
Examine how banking risk remains despite regulation and how banks can and do organize their strategy in the context of Basel Capital Adequacy regulations

Who Should Attend?

The Bank Capital Adequacy Under Basel III Course is suitable for:

Risk managers, regulators, internal auditors, bankers and analysts, but is also appropriate for a broader audience who wish to gain insight into capital adequacy and its importance for banks.
It is targeted at an intermediate level and assumes only a basic understanding of accounting, financial products, and banking functions.

Course Outlines:

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 standardized 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).