Introduction to Basel lll Training Course
Course Highlights and Agenda
Is Basel lll the answer? Will increased regulation prevent another credit crisis?
These questions are yet to be answered, but Basel lll seems set to be rolled out as planned.
It is critical to stay abreast of the proposed changes in order to be prepared for what the future holds. In this course, we will look at the development of the Basel Accords and specifically the proposed changes under Basel lll. We will look at how these changes will affect current practices and the organisation of business and its controls. This course will emphasise the practical impacts of the Basel lll proposals and consider how these can be best implemented.
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- Overview of banking – balance sheet, gearing, asset types, interest margin, funding sources
- Background to banking regulation and local regulators
- Definitions of capital and return on equity, capital ratios, RWA
- Market risk types
- Credit risk types
- Operation risk types
- Liquidity risk
- Other risks
- Measuring risk
- Regulatory failures and other issues
Case Study: Lehman Brothers and the credit crunch
Evolution of International Banking Regulation
- Original Basel Accord (1988) and purposes / weaknesses
- Banking Book / Trading Book split
- Basel II background and purposes
- The Three Pillars approach – implications
- Capital Rules under Basel II
- Risk management and disclosure under Basel II
Exercises: Calculating Regulatory Capital
Overview of Basel III Proposals
- What are the fundamental new proposals under Basel III?
- Definitions of Regulatory Capital – Tier 1, 2 and 3
- Amount of capital – increased base requirements, stricter definition
- Hybrid capital issues – CoCos and others
- Ratios between Regulatory Capital Tiers
- Conservation and other capital buffers
- Anti-cyclical buffers
- Systemically Important Financial Institutions (SIFIs)
- Liquidity standards and ratios – stable funding
- Leverage ratios
- Other issues
Time Table for Basel III
- What is the likely implementation time scale?
- How will implementation be phased in?
- What about firms which are not yet Basel II compliant?
Basel III in More Details
- Pillar i issues
- Minimum capital standards
- Stressed var
- Internal ratings
- Economic capital
- Pillar II issues
- Firm wide risk management
- Capital modelling and planning
- Pillar III issues
- Greater risk disclosure
- To what extent do these go beyond Basel II?
Impact of Basel III
- How will Basel III affect a bank’s business model?
- Funding issues – use of repo, interbank, deposits
- Capital issues
- Lending businesses
- Trading businesses
- Structured products
- Other business types
- Designation of SIFI
- How will this effect bank strategy?
- Will it change how banks are structured and managed?
- What challenges does Basel III present for banks?
- Systems and data
- Personnel and training
- Internal controls and monitoring
- Reporting and documentation
- Models and modelling
- Capital raising
- Strategic reviews
Case Study: Capital Modelling
Class Discussion: Delegates are invited to introduce specific topics around Basel III for class discussion.