Venue: Koločep, Croatia. Date: To be announced.

Course Description and Objectives

Basel II and the new European Directive on Capital have changed the environment of banking industry. Bank managers as well as bank regulators are challenged to redefine their best practices.  In this context, the course aims at providing an overall perspective on the Basel II revolution and its impact. Particular emphasis will be on risk definition, risk measure and risk management for bank compliance with Basel II. This course covers market, credit, liquidity, interest rate and operational risk as well as, supervision, economic capital and disclosure requrements.

Expected Outcomes

• Understand the three Pillars of the Basel II framework and challenges related to implementing this novel regulatory approach in practice
• Identify, measure, and manage market, credit, liquidity, interest rate and operational risks including    thorough understanding of Value-at-Risk concept and implementation.
• Understand the role that the central bank will play in risk-based supervision of financial institutions
• Understand how to calculate and apply economic and regulatory capital, as well as RAROC.
• Learn about best practices of risk reporting
•  Learn how to handle challenges related to valuation and risk assessment of trading and banking portfolios in emerging markets.

Who Should Attend

This course should be of fundamental interest to:

• All bank managers in charge of risk measure and control
• Internal control and reporting
• Senior bank managers concerned with the bank’s risk and capital strategy
• Central Bank regulators.

In addition, it should be of considerable interest to insurance companies and fund managers executives working on risk control and reporting, academics interested in the field of risk management, as well as to anyone interested in learning about the forces that are reshaping practices of financial institutions.

Course Outline

• The regulatory framework and the core principles for effective banking supervision and for payment systems
• The role of capital requirements: Tier 1, tier 2, and tier 3 regulatory capital
• Work in teams to prepare the case  “National Bank of Los Angeles”
• Case presentation: Computing regulatory capital under Basle I  -  National Bank of Los Angeles case.
• Measuring the capital at risk: Fixed Income, Foreign exchange, and Equity risk
• Use of internal models
• Back-testing of risk models.

Day 2

• Credit Risk in Basel II
• Traditional approaches to credit risk measurement
• Credit risk under  Basel II: the standardized approach and the internal risk based approach
• Credit Risk in Basel II
• RAROC
• Guest speaker presentations on implementing Basel II in an emerging market setting and the region 
• Liquidity risk and Interest rate risk
• Measuring the bank’s liquidity exposure
• Key liquidity ratios
• Duration model of interest rate risk
• Convexity 

Day 3

• Operational risk 
• The basic indicator approach; the standardized approach; the advanced measurement approach (AMA)
• Pillar 2 and Pillar 3 : Supervision and discipline of commercial banks and bank holding companies
• Corporate  governance issues