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.
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
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.
Our courses in London take place at the following locations :
Once you register for this course, we will subsequently send the invoice and course information, including location, trainer, and other logistics.
Pay Attention, Please! The course location is subject to availability; the course time will be precise one week before the course start date! We may change the course location if there is no availability, and we will let you know about the location change once it happens.
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
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.
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
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
Regulatory Capital in Banks
Basel and the three pillars
Overview of minimum capital ratios
Exercise: Analyzing the Pillar 3 report of a large bank
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
Purpose of VaR
Methodologies for calculating VaR
Regulatory Capital for Market Risk
Trading book and banking book
Internal models – the use of VaR to define regulatory capital
Exercise: Market risk disclosures at a global bank
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
Types of credit risk
Credit Risk Indicators
Mitigating Credit Risk
Securitization and credit derivatives
Exercise: Credit portfolio management in a global bank
Quantifying Credit Risk
Loss given default (LGD) and recovery
Regulatory Capital for Credit Risk
Standardised risk weights
Exposure at default methodologies
Internal rating based (IRB) approach
Exercise: Cost of credit
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
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
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
Advanced measurement approach (AMA)
Basel III new Operational Risk Standardized Approach
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
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