Credit Risk Measurement and Management
3 Day Workshop
(Workshop is not being offered at this time)
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
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.
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.
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