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Credit Risk Measurement and Management
3 Day Workshop
Introduction
Key features include:
an explanation of credit risk and the type of products which generate this type of risk
the Basel Accord and the regulation for credit risk measurement, management, supervision and disclosure
a description of the approaches for calculating credit risk capital
an explanation of securitization, credit derivatives and collateral and their Basel regulations
an overview of credit risk supervision. and disclosure
Who should attend this seminar?
This course is intended those either new to risk management, credit operations, or who wish to gain an understanding of risk-based regulation and how they are applied to credit risk. It will be of use to:
risk managers and analysts
business managers and team leaders
middle and back office personnel
internal and external auditors
it and operations professionals
regulators and supervisory professionals
anyone new to risk management within financial services
anyone new to credit risk within financial services
new entrants to the finance industry who wish to gain a more in depth understanding of credit risk
suppliers and consultants to banks and the risk management industry.
Pre-requisites
No prior experience of risk-based management, of the Basel II Accord, or of credit risk is required as this course first covers the basics before moving on to more advanced topics. However it is assumed that all delegates are familiar with common financial terms and have a basic understanding of banking and the functions of a financial institution.
Objectives
At the end of this seminar participants will have a basic understanding of:
the nature of credit risk and how this applies to financial products
the factors involved, the information used and the methods employed in assessing credit risk
what techniques are used in managing credit risk
the regulatory framework within which credit risk management operates and Basel II
the methods for calculating credit risk capital.
Content
Day 1 – Understanding credit risk and its management
Defining credit risk
The Basel Accords
What is credit risk?
The different types of credit risk
Sovereign
Corporate
Retail
Systemic
Counterparty
Concentration risk
Expected and unexpected losses
Financial products
Loans and overdrafts
Government and corporate bonds
Equity and mezzanine debt
Credit derivatives
Counterparty exposure from traded products
Trade finance
Mortgages
Credit cards
Examples
Mitigating and managing credit risk
The credit time line
Bad debt, doubtful debt and default
Credit assessments and scoring
Corporate credit scoring
Retail credit scoring
Diversification and portfolio management
Securitization
Collateral
Credit derivatives
Netting
Cash flow monitoring
Recovery management
Case study
Day 2 – The treatment of credit risk under Basel
Calculating credit risk capital under Basel
Risk-weights and risk-weighted assets
Credit risk and Basel I
Ratings and rating agencies
Basel II and rating agencies
The approaches for measuring credit risk capital
Obtaining approval for using a measurement approach
Data requirements and issues
Examples
The Standardised Approach
The nature of the Standardised Approach
The Standardised Approach’s asset classes and risk-weights
Off-balance sheet items
Difference between Basel I and Basel II
Examples
The Internal Ratings-Based approaches
The nature of the IRB Approaches
The IRB approaches and asset classes
The IRB parameters
Foundation based IRB Approach
The Advanced IRB approach
Backtesting
The usage test
Day 3 – Securitisation, collateral, supervision and disclosure
Securitization and credit derivatives
The nature of securitization
True sale
The role of banks
Securitization under Basel II
The Standardised Approach
The Rating-Based Approach
The Supervisory Formula
Internal Assessment Approach
Examples
The treatment of credit derivatives
Collateral
Haircuts
Collateral under Basel II
The effect of collateral on credit risk capital
The Simple Approach
The Comprehensive Approach
The Advanced Comprehensive Approach
Examples
Credit risk under pillars 2 and 3
What is supervision and disclosure
Home/host supervisory co-operation
Credit risk under Pillar 2
Counter party credit risk supervision
The role of internal and external audit
Pillar 3 and the external reporting requirements for credit risk
By becoming a GARP member you become part of a global community of financial risk professionals. 
