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 Duration 35 hours

Course Outline

Fundamentals of institutional risk

  • Defining risk and its criticality for financial institutions
  • Evaluating risk beyond potential losses
  • The international dimensions of banking and associated risks
  • An overview of primary risk categories in banking
  • The potential consequences of inadequate risk oversight
  • Establishing risk appetite
  • Implementing risk management protocols

Case study

International regulatory frameworks

  • Principles of risk-based regulation
  • The nexus between risk exposure and capital requirements
  • Defining capital adequacy
  • Major international regulatory instruments
    • Basel Accords
    • Sarbanes-Oxley Act

Case Study

The Basel Accords in detail

  • The evolution of international banking risk regulation
  • Objectives of banking risk oversight
  • Challenges in applying global regulatory standards
  • Basel I Accord and the Market Risk Amendment
  • The Basel II Accord
  • Capital requirements under Basel II
  • Basel 2.5 and Basel III provisions
    • The leverage ratio
    • Countercyclical capital buffers
    • Systemic interconnectedness

Case study: Capital implications under Basel III

Market risk management

  • Definition of market risk
  • Trading activities and their strategic rationale
  • Primary market instruments
    • Cash instruments
    • Derivative instruments
  • Strategies for mitigating market risk
  • Measurement and control of market risk
  • Regulatory standards for market risk
    • Basel II requirements
    • Basel III requirements

Case study: Consequences of market risk mismanagement – JP Morgan

Credit risk oversight

  • Understanding credit risk
  • Credit products in global markets
  • Mitigation and control of credit risk
  • The credit approval process
  • Conducting credit analysis
  • Portfolio oversight
  • Quantifying credit risk
  • Regulatory standards for credit risk
    • Basel II requirements
    • Basel III requirements

Case study

Operational risk controls

  • Defining operational risk and its significance
  • Distinguishing between expected and unexpected losses
  • Categorizing operational risk events
  • The three lines of defense model
  • Operational risk management practices
  • Establishing an operational risk management framework
  • Initial implementation steps
  • Reporting structures for operational risk management
  • Scope of operational risk management
  • Evaluation and assessment of operational risk
  • Regulatory standards for operational risk
    • Basel II requirements
    • Basel III requirements

Case study: UBS

Liquidity risk supervision

  • Understanding liquidity risk
  • Forms of liquidity
  • Impact of inadequate liquidity management
  • Identifying liquidity sources
  • Quantifying liquidity positions
  • Stress testing methodologies
  • Strategies for managing liquidity
  • Regulatory standards for liquidity risk
    • Basel II requirements
    • Basel III requirements

Case study:

Asset and Liability Management and additional risks

  • Principles of Asset and Liability Management (ALM)
  • The role of ALCOs and Treasury departments
  • Distinguishing between Banking Book and Trading Book
  • Interest rate risk within the banking book
  • Measuring and managing Interest Rate Risk in the Banking Book (IRRBB)
    • Contractual versus behavioral approaches
    • Stress testing
  • Other significant risk categories

Case study:

Supervision and disclosure standards

  • Understanding supervisory and disclosure obligations
  • Coordination between home and host supervisors
  • The Internal Capital Adequacy Assessment Process (ICAAP)
  • Supervision and disclosure requirements under Basel frameworks
  • Specific changes introduced by Basel III

Case study:

Defining Enterprise Risk Management (ERM)

  • Concepts of Enterprise Risk Management
  • Advantages of implementing ERM
  • The ERM methodology
  • Role of the risk management function
  • Portfolio oversight
  • Risk considerations in new product development
  • Guidance from the Basel Committee
  • Widely adopted ERM frameworks

Case study

Integrated risk management

  • Consolidating risk oversight across the institution
  • Function and structure of risk committees
  • Formulating risk policies
  • Identification and evaluation of risks
  • Aggregation of risks across different categories
  • Calculation of economic capital
  • Interdependencies among risk types

Case study

Corporate Governance standards

  • Definition and scope of corporate governance
  • Stakeholder interests and potential conflicts
  • Benefits of robust corporate governance
  • Evolution of governance standards – Cadbury, Walker, Hicks reports
  • External perspectives on governance (rating agencies, regulators)

Case study: Can a bank be “Too big to manage”?

Best practices in corporate governance

  • Organizational structures
  • The role of non-executive directors
  • Governance techniques and strategies
  • Committee functions and management protocols
  • Internal and external communication
  • The role of senior management
  • Internal governance frameworks
  • Guidance from the OECD and Basel Committee

Case study:

Risk Governance oversight

  • Governance of risk management
  • Cultivating an environment of risk awareness
  • Implementing a risk-centric culture
  • Function of risk management committees
  • Alignment of governance, risk, and compliance

Case study:

Future outlook

  • The emerging regulatory environment
    • Implications for the banking sector
    • Implications for regulatory bodies
  • Key priorities in the global banking regulatory agenda
  • Anticipated areas of regulatory focus

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