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Capital Adequacy Requirements for Banks
(Basel II and III)

This course aims to educate participants to be not only proficient in factors that govern the capital markets but also understand what makes the market work. The course is the most effective training for professionals who are entering either risk and regulatory functions or investment banking and finance departments in corporates because it provides targeted education; a concise and comprehensive knowledge of the local capital market landscape.

COURSE OBJECTIVES

  • They will appreciate the importance of regulating the bank’s capital adequacy requirement
  • They will understand the historical development of capital adequacy requirement
  • They will understand the different risks involved and the appropriate approaches to measure and report these risks.
  • They will understand the different pillars of market supervision
  • They will be able to distinguish the different approaches to measuring credit risk

TARGET PARTICIPANTS

  • Anybody involved in risk and regulation
  • Corporate bankers
  • Corporate finance staff
  • Credit analysts
  • ALM traders
  • Treasury sales and Trading staff
  • Regulators
  • Derivatives structure and marketers
  • Fixed income originators
  • Treasury operations managers
  • Treasury middle office officers
  • Risk Management executives
  • Corporate treasurers
  • auditors

COURSE CONTENT

Introduction

  • The balance sheet of a bank
  • The risk components
  • Systemic risk

Capital Adequacy Requirement: Basel I 1988

  • Cooke ratio
  • Credit risk weights
  • Limitations and the call for a new frame work

Amendment to Basel I: Market Risk

  • Treatment of Off-balance sheet instruments
  • Limitations

The New Frame Work: Basel II

  • Scope of application
  • The 3 Pillars of Market Supervision
    - Capital Adequacy Requirement
    - Supervisory Review Process
    - Market Discipline

1. Pillar: Minimum Capital Adequacy

  • Regulatory capital
  • Risk-weighted assets
  • Market risk
  • Credit risk
  • Operational risk

2. Pillar: Supervisory Review Process

  • 4 key principles
  • Specific issues
  • Other issues

3. Pillar: Market Discipline

  • General considerations
  • Disclosure requirements

Other Relevant Regulation

  • Liquidity reserves
  • Accounting Standard IAS 39 or GAAP equivalent
  • Non-Performing Loans (NPL)

What is Missing from Basel II

  • Diluted equity
  • International implementation
  • Correlation risk
  • Liquidity risk
  • Economic capital versus regulatory capital

The Proposal for Basel III

  • Reviewed capital proposal
  • Global liquidity framework
  • Transparency

The Capital Proposal

  • Improve quality of capital by strengthening common equity
  • Tier 1 to be strengthened
  • Capital conservation buffer
  • Countercyclical buffer
  • Additional loss absorption capacity for ‘too big to fail’ institutions
  • Non-risk based leverage ratio
  • Ordinary unwinding procedure

The Swiss Regulation: Bern I

  • Additional loss absorption buffer
  • Contingent Convertibles (CoCos)

The Global Liquidity Standard

  • Liquidity coverage ratio
  • Net stable funding ratio

Other changes

  • Public sector capital injections
  • OTC derivatives
  • Credit rating agencies
  • Accounting
  • Shadow banking

What about Basel 4

  • Other expected changes over time

 

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