Bank Capital Adequacy Under Basel III and CRD IV & V

• To understand fully why regulators, continue to impose tight regulation on Banking institutions, the reasons why the likely way forward on the impact on business models as a result
• Explain 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
• Understand 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
• Examine how banking risk remains despite regulation and how banks can and do organise their strategy in the context of Basel Capital Adequacy regulations

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/regulators’ 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
• All change in 2022?

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

• 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, RWA’s 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 now essential
• Practical examples/Case study

 Session 5: Basel & Liquidity

• 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

• 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 required from supervisory authority
• Financial models based on global expected shortfalls, default risk charge and stressed capital add-on
• 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
• GSIBS & DSIBS
• Less reliance on modelling
• More disclosure
• More Bail-in measures
• Continued stress test and scenario modelling

 Session 11: Course Wrap Up and Open Forum

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

The Basel III course trainer 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 a vast range of clients, from global giants to small firms and partnerships. He is an accomplished global trainer and has delivered extensive programmes in the UK, USA, South America, Europe, Africa, Asia and the Middle East.

The 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 & Retail Banking. He is also a highly experienced soft skills trainer and has completed numerous “train the trainer” assignments.