Bank Capital Adequacy Under Basel III and CRD IV & V

The purpose, principles, evolution and application of the Basel Capital Adequacy regulations

A close-up of the Tower Bridge London showing the intricate details of the structure

A two-day bank capital adequacy course

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Basel III Course Introduction: The Evolution of Financial Regulation

Current challenges:
- Brexit impact
- COVID
The reason for regulation
The journey from Basel 1-Basel III
Improving risk & asset management
Aligning regulation and economic realities
The technical challenges from a bank/regulator’s point of view
How much capital is sufficient capital?
The 3-pillar regulatory structure
The impact of COVID – so far
GSIB’s & Domestic SIBS
IFRS9
Will all change in 2022?

Session 2: Determining How Much Capital - Internal Capital Adequacy Assessment Process (ICAAP)

Basel III training explores the key principles
Identifying risks and allocating risk capital
Pillar One & Pillar Two risks
Challenge and independent review
Capital buffers – optional and mandatory
Regulatory versus economic capital
Arriving at the agreed CAR
Practical examples/Case study

Session 3: Basel in More Depth

Fixing what went wrong
An overview of the new requirements
Going concern versus gone concern capital
CoCo’s – additional capital
Capital buffers:
- Capital conservation buffer
- Countercyclical buffer
CAR, RWAs and the Leverage Ratio
Counterparty credit risk
Banks own buffers
Total Loss Absorbing Capacity (TLAC)
Minimum Requirements for own funds and eligible liabilities (MREL)
Interaction of TLAC & MREL with other requirements/ratios
Proposed capital floors and the interaction with CAR
Liquidity risk – much greater focus
Practical examples/Case study

Session 4: How Does Basel Impact Banks?

Stronger balance sheet
Much better liquidity
More conservative risk management
Lower profits
Less growth potential
New imperatives:
- De-risking
- Moving towards fee income
- Pressure on margins
- Pressure on costs – particularly in compliance
Effective strategic capital management is now essential
Practical examples/Case study

Session 5: Basel & Liquidity

This Basel 3 course looks at the ILAAP
Liquidity Buffers
Liquidity Coverage Ratio
Net Stable Funding Ratio
Required Stable Funding
Relationship between capital and liquidity
Liquidity Stress Testing
Practical examples/Case study

Session 6: Basel & Credit Risk

Bank Capital Adequacy training takes you through the three options for calculating credit risk
Standardised, Foundation IRB, Advanced IRB
Understanding PD, EAD & LGD
Revised Standardised approach
Overview of Standardised Approach details
RORAC – a practical example
Practical examples/Case study

Session 7: Leverage

Leverage Ratio
CAR versus Leverage Ratio
Reducing Leverage
ALM Management
Practical examples/Case study

Session 8: Market Risk

Definition
VAR models
New Formulae
Internal models - high level
Approval is required from the supervisory authority
Financial models based on global expected shortfalls, default risk charges and stressed capital add-on
Basel III training also includes practical examples/Case study

Session 9: Operational Risk

Definition
Losses from inadequate or failed internal processes, people and systems or from external events
Three current conventional methods of calculation
Heat Maps - Likelihood/Impact
Revised calculation/process
Revised change approach
Based on Business Indicator (BI), marginal coefficient and scaling factor
Practical examples/Case study

Session 10: Moving Forward – What Changes Are Likely?

CRD V
CRR2
The move towards simplicity
G SIBS & D'SIBS
Less reliance on modelling
More disclosure
More Bail-in measures
Continued stress test and scenario modelling

Session 11: Basel III Training Wrap-Up and Open Forum

A highly successful, long and varied “fast track” career in risk management at Lloyds Bank led this Basel III course trainer to very senior management at an early age. He was headhunted to join a merchant bank at the main board director level to head the risk management function and now has over 40 years of experience managing risk in the UK banking and financial services sector.

He has been a freelance risk management training consultant since retiring and is currently an external Master Trainer at both HSBC and Bank of China, where he has delivered major projects on a wide range of topics. At HSBC he helped design their global flagship Risk Management Programme for senior middle managers and has delivered this globally for the past 5 years. He has also created and delivered training to many clients, from global giants to small firms and partnerships, including Basel III training courses. He is an accomplished global trainer and has delivered extensive programmes in the UK, USA, South America, Europe, Africa, Asia and the Middle East.

Redcliffe’s Basel III course trainer is a highly adaptive, hands-on and highly sought-after facilitator who always receives excellent feedback from delegates. He is comfortable training at any level of seniority and experience, from “black belts” to novices. In addition to his risk management specialism, his expertise includes but is not limited to Trade Finance, Regulatory Compliance, FCC & AML and all aspects of Corporate, Private and retail Banking.

In addition to his extensive expertise in Basel training, the trainer is also a highly skilled soft skills instructor and has successfully completed numerous "train the trainer" programs.

Basel III training will help you fully understand why regulators continue to impose tight regulation on Banking institutions and the likely way forward on the impact on business models as a result.
The impact of ESG.
The purpose, principles, evolution and application of the Basel Capital Adequacy regulations and what is required in terms of:
- Regulatory capital
- Risk-weighted assets
- Capital Adequacy ratios
Enable participants to apply the Basel Capital Adequacy rules to specific banks.
To consider the impact of the recent bank failures – especially Credit Suisse.
The impact of the proposed 2025 introductions of Revised Standardised Approaches.
How the institutions of the Basel Committee for Banking Supervision (BCBS) and the European Banking Authority (EBA) operate and what the shape of future European banking regulation will look like.
How banking risk remains despite regulation
Basel training evaluates how banks can structure and align their strategies within the framework of Basel Capital Adequacy regulations.

Redcliffe Training has been established for over 20 years and we are proud of our reputation for delivering excellent Basel 3 training within risk and compliance.
We are pleased to have been appointed Master Trainers in risk training by two of the world’s largest banks.
We have delivered this topic to the IFC, World Bank, ECA’s and a host of small and medium-sized institutions. As such we have a very clear idea of how market players of all sizes are dealing with this ever-changing regulatory framework.
We do not use academics or a textbook approach with our Basel III training. This course director is a former Chief Risk Officer with considerable hands-on vocational experience. He will share his experiences, both good and bad, to bring the Basel III course to life and make it more relevant.
This bank capital adequacy course uses lots of practical examples and case studies to illustrate the learning points. We aim to assist delegates to hit the ground running following the completion of the workshop.
This can be a complex subject with some of the requirements appearing to be either challenging or difficult to understand. We will avoid this pitfall by explaining all aspects of the requirements in a simple and easy to comprehend manner, taking time, if necessary, to build delegate understanding in clear stages.
We are always judged by our results and, to date, delegate feedback for our Basel III courses has always been excellent.
Basel Capital Adequacy is a multifaceted and continually evolving area of regulation. In light of this, our highly interactive and detailed course provides a comprehensive overview of the past, present, and likely future regulatory frameworks. The training explores how these rules apply to different institutions, while also examining their underlying purpose and evolution—shedding light on why they have developed as they have. The concluding segment of Basel Capital Adequacy training addresses how banks can adopt optimal strategies to maximise profits, minimise risks, and ensure full compliance within both the letter and the spirit of the regulations.

With the benefit of hindsight, global regulation failed to cope with the stresses of the 2008/2009 credit crunch. To correct this weakness, Basel III and its subsequent iterations have ensured that the two areas of greatest bank weakness; loss-absorbing capital and liquidity and risk management are as robust and effective as they need to be to survive a repeat. This, however, comes at a price. If banks are required to hold much more liquidity than they used to, this must be at the expense of earnings. Ditto more loss-absorbing capital and lending.

Basel III has given regulators “superpowers” and they are using them with the full support of an electorate which probably feels we don’t completely trust the banks to self-regulate. As of now, there has probably never been a time in recent history when banks have been so closely micro-managed. Will this make them safer? Will it make them less profitable?

The recent and unexpected collapse of Silicon Valley Bank and the even more consequential collapse and rescue of Credit Suisse (a “too big to fail” GSIB) came as an unwelcome reminder that regulation is not fool-proof as new risks and operating environments develop. These collapses will no doubt prompt more changes but at this stage, it is not clear what shape they will take. Watch this space.

Basel III is being adopted almost universally as a benchmark of excellence and is probably a prerequisite for doing business with global banking partners. This is critical for those nations seeking or needing to attract inward capital investment. Without global partners, raising the funds required domestically or enjoying access to Trade Finance and international wealth management is very challenging.

We are told there will be no Basel IV (but this could change post Credit Suisse) and there are still plenty of enhancements to Basel III in the pipeline that will probably continue to constrain the ability of banks to take greater risks.

Basel III training courses are designed to explain to you, in practical terms, the impact of Basel III and CRD IV. It demonstrates how it adds value to an organisation despite its flaws and it explains the key challenges posed by its implementation.