Training Outline 

Introduction

• Why is there regulation? Some past and recent banking disasters and their causes
• Ideally: ‘goldilocks regulation’ – not too weak, not too harsh
• Who regulates? Basel and Central Banks
• Why are there so many Basels, CRDs and CRRs?
• A bank’s business model
• The different risks it gives rise to
• How they can be mitigated
• The two types of Capital/Own funds – Tiers 1 and 2
• The two main sources of Capital
• The Three Pillars
• How bank runs can happen
• Liquid assets and what they consist of
• Asset-liability management – the need for and sources of stable funding

Pillar One

Capital

• Consolidated/Group, solo
• Provisions for expected loss – IFRS 9 – Capital for unexpected loss
• Part 1: How much risk would the bank have in a stressed scenario? E.g. Credit risk and Risk Weights
• The different Approach levels to estimating risk – e.g. Standardised, Internal
• Part 2: How much Capital does the bank have and what deductions must be made? The various buffers
• Part 3: What is the minimum ratio between the first two?
• Other risks:
  • Market Risk – e.g. interest rates
  • Operational Risk – examples
  • A more specific kind of risk only arising with certain types of transaction (e.g. swaps): Counterparty Credit Risk (CCR) and Credit Valuation Adjustment (CVA) – in brief
• MREL and ‘bail-in’ debt
• The Leverage Ratio – the unweighted Exposure Measure

Liquidity

• The Liquidity Coverage Ratio (LCR) – outflow and inflow weights, liquid assets
• The Net Stable Funding Ratio (NSFR) – Required v Available Stable funding, weights

Pillar Two

• A bank’s Internal Capital Adequacy Assessment Process (ICAAP), ditto Liquidity
• P2A: Interest Rate Risk in the Banking Book (IRRBB), gap analysis, the two methods, EVE and NII (in brief)
• P2R: Internal Capital and Liquidity stress-testing (in brief)