Enterprise Risk Management and M&E for Credit Risk Guarantee Projects

Course Info

Length: 2 Weeks

City: Kuala Lumpur

Type: In Classroom

Available Dates

  • Feb-26-2024

    Kuala Lumpur

  • Mar-25-2024

    Kuala Lumpur

  • Apr-22-2024

    Kuala Lumpur

  • May-27-2024

    Kuala Lumpur

  • June-24-2024

    Kuala Lumpur

  • July-22-2024

    Kuala Lumpur

  • Aug-26-2024

    Kuala Lumpur

  • Sep-23-2024

    Kuala Lumpur

  • Oct-28-2024

    Kuala Lumpur

  • Nov-25-2024

    Kuala Lumpur

  • Dec-23-2024

    Kuala Lumpur

Dates in Other Venues

  • Feb-26-2024

    Istanbul

  • Mar-04-2024

    Paris

  • Mar-04-2024

    Singapore

  • Mar-11-2024

    Barcelona

  • Mar-11-2024

    Dubai

  • Mar-25-2024

    Istanbul

  • Apr-01-2024

    Paris

  • Apr-01-2024

    Singapore

  • Apr-08-2024

    Dubai

  • Apr-08-2024

    Barcelona

  • Apr-22-2024

    Paris

  • Apr-29-2024

    Singapore

  • Apr-29-2024

    Istanbul

  • May-06-2024

    Paris

  • May-06-2024

    Singapore

  • May-13-2024

    Dubai

  • May-13-2024

    Barcelona

  • May-27-2024

    Istanbul

  • June-03-2024

    Singapore

  • June-03-2024

    Paris

  • June-10-2024

    Barcelona

  • June-10-2024

    Dubai

  • June-24-2024

    Istanbul

  • July-01-2024

    Paris

  • July-01-2024

    Singapore

  • July-08-2024

    Dubai

  • July-08-2024

    Barcelona

  • July-22-2024

    Paris

  • July-29-2024

    Istanbul

  • July-29-2024

    Singapore

  • Aug-05-2024

    Singapore

  • Aug-05-2024

    Paris

  • Aug-12-2024

    Barcelona

  • Aug-12-2024

    Dubai

  • Aug-26-2024

    Istanbul

  • Sep-02-2024

    Paris

  • Sep-02-2024

    Singapore

  • Sep-09-2024

    Barcelona

  • Sep-09-2024

    Dubai

  • Sep-23-2024

    Paris

  • Sep-30-2024

    Singapore

  • Sep-30-2024

    Istanbul

  • Oct-07-2024

    Paris

  • Oct-07-2024

    Singapore

  • Oct-14-2024

    Barcelona

  • Oct-14-2024

    Dubai

  • Oct-28-2024

    Istanbul

  • Nov-04-2024

    Singapore

  • Nov-04-2024

    Paris

  • Nov-11-2024

    Dubai

  • Nov-11-2024

    Barcelona

  • Nov-25-2024

    Istanbul

  • Dec-02-2024

    Singapore

  • Dec-02-2024

    Paris

  • Dec-09-2024

    Dubai

  • Dec-09-2024

    Barcelona

  • Dec-23-2024

    Paris

  • Dec-30-2024

    Singapore

  • Dec-30-2024

    Istanbul

Course Details

Course Outline

10 days course

Fundamentals of Credit Risk
 
  • The key macro and micro financial concepts behind, and drivers of, credit risk
  • Measurement of credit risk and adverse outcomes
  • Assessing credit risk and default probability of loan portfolios
  • Key determinants for managing credit risk:
    • Probability of default (PD)
    • Exposure at default (EAD)
    • Loss given default (LGD)
  • Credit migration and transition matrices
  • Fundamental analysis of financial statements, key ratios, and qualitative characteristics of the balance sheet
  • Off balance sheet and contingent credit risk
  • Market-based approaches, bond spreads, swap rates
  • Counterparty credit risk
  • Credit scoring, credit risk modelling, risk profiling and assessing creditworthiness

Credit Ratings Methodologies and Application

 

  • Review of ratings classifications systems of the major Credit Ratings Agencies (CRAs)
  • The principal credit ratings agencies – Moody’s, Standard & Poor’s, Fitch
  • Overview of the ratings methodologies – issuer analysis, historical data, business cycles
  • Commercial paper ratings
  • Sovereign ratings – approach to developed markets and emerging markets
  • Conflicts of interest - representing credit issuers but designed to protect credit purchasers
  • Why did the CRAs perform so poorly in the rating of collateralized debt obligations (CDOs) and other derivatives?
  • Ratings migration matrices – use by banks in determining credit risk value at risk (VaR)
  • Impact of upgrades/downgrades on market perceptions of creditworthiness
  • Dodd-Frank Act de-emphasis on reliance by financial firms on external ratings

 

Capital Charges and Accounting Principles
 
  • Review of the distinction between the banking book and the trading book
  • Basel III attempts to address regulatory arbitrage
  • Treatment of securitizations and off-balance sheet exposures
  • Available for Sale issues – impacts on liquidity, high-quality liquid assets (HQLA), rigidity of balance sheets
  • Detailed examination of IFRS 9 – implementation timetable, further revisions?
  • Recognition of expected losses and early warning of asset impairment
  • Amortized cost – held to maturity requirements
  • Fair value though other comprehensive income (FVOCI)
  • Fair value through profit or loss (FVPL)

 

Counter-Party Credit Risk      
                                    
  • Examine the various facets of credit risk which hinge on losses sustained from the failure of an obligor to honour contractual obligations
  • Distinguish the separate components of credit risk:
    • Probability of default by obligor – how reliably can it be estimated?
    • Probability of downgrade or widening credit spreads of counterparty
    • Recovery rate – what percentage of obligation can be recovered after default?
    • Credit exposure – estimating loss magnitude about capital buffers
  • Determination of a credit default event, ISDA Master Agreement, Credit Support Annex
  • Understand the concepts of credit rating and scoring and critically examine how useful, such techniques are for determining the actual risk of default.
  • New components in the Basel III framework for addressing issues related to default and deterioration of the credit quality of counterparties
  • Credit Valuation Adjustment (CVA) and Debt Valuation Adjustment (DVA)
  • Explanation of key concepts of Expected Exposure (EE), Expected Positive Exposure (EPE), Wrong Way Risk (WWR)

 

Measuring Credit Risk and Techniques for Credit Risk Modelling
 
  • Credit Metrics, credit scoring and credit rating systems
  • Quantitative modelling of credit risk using stochastic processes
  • Estimating probability of default – KMV Model, distance to default techniques
  • Explain how debt and equity can be understood as options on the firm
  • Techniques for modelling default risk of CDO’s, CMO’s and other structured vehicles
  • Lessons from SIVs and another off-balance sheet financing on credit risk management
  • Adapting VaR measures to include a metric for default value at risk
  • Credit Migration matrices - scaling over different time frames
  • Integrating Credit VaR (CVaR) and Market VaR
  • Portfolio CVaR – joint probabilities of default – copula techniques
  • Techniques for estimating LGD and recovery rates

 

Sovereign Credit Risk
 
  • Principal factors used to determine credit worthiness of a sovereign
  • Issues relating to sovereign bonds under different jurisdictional frameworks
  • Deterioration in public balance sheets –high debt/GDP ratios
  • The linkage between sovereign risk and risks to the local banking system
  • Macro-economic drivers of ratings - global imbalances, surplus/deficit nations
  • Role of sovereign Credit Default Swap (CDS) market – is it still vital or declining?
  • Sovereign debt re-structuring- bailouts/bail-ins
  • Protection to different stakeholders – seniority of claims, the preferred status of central banks
  • Collective Action Clauses (CACs)
  • Sovereign domino thesis and financial contagion
Stress Testing Methods, Benefits and Limitations
 
  • Overview of sensitivity of credit to market risk, interest rate risk, systemic risk
  • Explanation of the techniques for conducting stress tests
  • Back testing using historical returns
  • Stress testing using hypothetical returns
  • Explanation of Principal Components Analysis
  • Sizes of historical samples – are they sufficiently large to include wide variety of conditions?
  • Benefits of more loosely coupled systems as less fragile.

 

Interpreting Credit Related Market Data
 
  • Monitoring government bond yields and changes to the term structure of interest rates for USD, euro, sterling, and yen
  • Theories of the yield curve
    • Liquidity premium
    • Safe-haven premium
  • Credit spreads for investment grade and high yield instruments relative to government issues and inter-bank rates.
    • Over Treasuries, over bunds, over gilts.
    • SOFR, SONIA, ESTER, overnight indexed swap (OIS), Euro Overnight Index Average (Eonia)
  • Option Adjusted Spreads (OAS)
  • Credit Default Swap (CDS) rates – estimation of probabilities of default
  • Measuring market sentiment – investor confidence indices, contrarian indicators

 

Credit Assessment and Financial Ratio Analysis
 
  • Financial Statement Analysis
  • Credit Assessment based on a detailed analysis of corporate balance sheets, income statements and cash flow statements
  • Impact of Corporate actions - capitalization or consolidation, rights issues
  • Financial ratios - Profitability, Liquidity, Asset turnover, Gearing
  • Liquidity ratios, pay-out ratios, financial stability ratios, operational gearing
  • Dividend policy, return on equity (ROE), Return on Capital Employed (ROCE)
  • Earnings per share, P/E Ratios (historical and prospective)
  • Dividend yield, Dividend/interest cover, Price/book
  • Ratio-based Methods for Determining Credit Stress and Defaults
  • Altman’s Z score model, KMV Model, Moody’s Analytics,
  • Ohlson financial distress model, Risk Metrics, McKinsey Credit Portfolio View

 

Managing Credit Risk and Regulatory Capital Charges for Credit Risk
 
  • Mechanics of credit derivatives and how they can be used for hedging portfolio credit risk
  • Single name credit derivatives (unfunded and funded structures)
  • Basket and Tranche CDS, index-based CDS
  • Impact on regulatory capital from use of, and exposure to, credit derivatives
  • ISDA documentation and legal framework for interest rate (IR) swaps, Credit Support Annex (CSA)
  • Regulatory capital under Basel III
  • New approaches to capital charges for credit risk under Basel III
  • Stress testing – how to conduct stress testing with Monte Carlo Simulations
  • Calculating capital charges for credit exposures
    • Standardized approach
    • Foundation internal ratings-based approach
    • Advanced internal ratings-based approach

Course Video