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The Journey From Basel II to Basel III

Understand the Basel II & Basel III regulations to discover the implications of the financial crisis on the capital adequacy rules for banks. Follow the shifting attention of the regulators towards systemic risk, leverage and liquidity.

In December 2010 the BIS released the latest, most significant recent update to Basel II, known widely as 'Basel III'. Our training course provides full coverage of these changes, including the revised treatment of securitisation exposures, supplemental guidance under Pillar 2, and the new liquidity ratios.

Price: USD 1,950 per delegate

Book > 14 days in advance, only USD 1,800

Group discounts available: please enquire

  • Location:  Hong Kong
  • Upcoming dates: Please enquire

This intensive 2 day course is led by highly experienced industry practitioners. Our trainers are professional risk managers and consultants who are actively involved in Basel II and risk work. They can not only explain the regulations and the latest thinking in changes and direction, but can also provide many practical examples and case studies to aid understanding of the rules and how best to implement for competitive advantage.


This course will take you step by step through the new Basel Capital Accord, commonly referred to as Basel II, examining the new risk management approaches introduced as a result of the regulations, and looking into the latest techniques used to achieve compliance.

The course tutor is an active practitioner with many years experience working with banks throughout their Basel programme. Practical examples and real life experience will be used to put the Accord requirements into context and show how real business benefit can be achieved through more than just meeting minimum regulatory requirements.

The course will begin by putting Basel II in context, examining the journey from the original capital requirement directive to the development of the risk-sensitive framework that is Basel II, and finally through to the recent Basel III proposals. The different approaches allowed under Basel II will be examined in detail, focusing on the areas which are receiving most attention from regulators.

The measurement of credit risk, market risk and operational risk will be explained. The differences and considerations for different methods will be discussed and examples given. The credit risk framework of Basel contains many sets of rules for different areas – the treatment of specialised lending, equity exposures, OTC derivatives and securitised products, and the rules for credit risk mitigation will all be introduced and put in context.

Practical techniques for the management of operational risks within an organisation will be given and set against the Basel II requirements. Strategies for risk assessment and development of key risk indicators will be introduced.

A critical factor in adoption of Basel is ensuring integration into bank operations and senior level board involvement. Experience of programme setup and governance and oversight strategies will be given.

The expert tutor will look at the recent enhancements to Basel II and explore the new Basel III rules to be implemented in 2013. The tutor will discuss the latest thinking in risk management and share his, and wider industry and regulator views, about the future direction of the Basel regulations.


  • What is Basel II? Understand the origins of the Basel Accord and its place in modern risk management and capital adequacy
  • Why the need to revise Basel II? Learn what impact the financial crisis had on the regulations that led us to Basel III
  • Understand how to comply at minimum cost and how to use compliance as a competitive advantage
  • Discuss the challenges in implementing Basel II, and in integrating with senior management and board decision-making and oversight
  • A detailed look at modern operational risk management, including quantification, loss modelling, key risk indicators and risk assessment
  • Latest thinking on approaches to stress testing and the pillar 2 obligations under Basel II
  • Learn the different regional approaches for implementing Basel II, and the timetable and rollout for adoption of Basel III
  • Where next? Understand the recent changes and industry thinking for financial regulation


  • Board of Directors
  • Head of Risk Management, Credit Risk, Operational Risk or Market Risk
  • Head of Compliance
  • Project Managers
  • Risk management professionals and consultants
  • Business analysts involved with Basel II implementation
  • IT and Information Security Managers

Detailed Course Syllabus


• Capital Adequacy

• Role of the BIS and the Basel Committee

• History of the Basel Capital Accord

• Basel II – better reflecting risk in capital calculation

• Timeline for implementation of Basel II in different jurisdictions

• New Basel III Guidelines – Summary


The structure of the Basel Accord

• Pillar 1 – measuring capital adequacy

• Minimum Capital Requirements

• Different approaches to capital calculation – overview of approaches and why they exist

• Pillar 2 – supervisory review

• Pillar 3 – market discipline

What does Basel II mean for Banks?


The different approaches of Basel II

• The standardised, Foundation IRB and Advanced IRB approaches

Standardised approach

• Asset classes and risk weights given by Basel II

• Risk weights by external credit rating

• Issues with External Credit Ratings

The IRB approach

• The IRB Approach and Risk Weight Calculation

• The use of PD, LGD and EAD to calculate risk weighted assets

• Differences between the IRB Foundation and IRB Advanced approaches

• Definition of default under Basel

• Probability of Default (PD)

• Techniques for modelling PD

• Exposure at Default (EAD) – definition and drivers of EAD

• EAD modelling techniques and examples

• Loss Given Default (LGD) – definition and modelling

• Advantages of using a Bank’s own LGD estimates

• Maturity (M) and effective maturity under the Foundation and Advanced approaches

• The concept of Expected Loss

Credit Risk for Project or Specialised Lending

Credit risk mitigation under Basel II

• The treatment of Guarantees, Credit Derivatives, Collateral and netting of assets

• Credit Risk Mitigation under the Standardised Approach

• The simple and comprehensive approaches to credit risk mitigation

• Credit Risk Mitigation under the IRB Approach

• Minimum requirements for collateral under IRB

Basel II – Equity exposures

• 3 approaches for dealing with equity exposures

• The Standardised Approach, Market-based approach and the PD-LGD Approach

Basel II – OTC Derivatives

• Calculation of add-on factor

Basel II – Securitisations

• Traditional and Synthetic securitisations

• Definition of Originating Bank and Investor

• Securitisation approaches for investments and originations

• The internal ratings-based approach, Supervisory Formula (SF) and Internal Assessment Approach (IAA)

Basel II – Provisioning Rules

• Risk Weighted Assets (RWA) Calculation, and Capital Requirement (K)

• Capital Requirement calculations for Retail and for non-Retail


Introduction to Operational Risk and management techniques

Basel II Operational Risk requirements

• Operational Risk – motivations and strategies

• Basic Indicator Approach (BIA)

• The Standardised Approach (TSA)

• Alternative Standardised Approach (ASA) for retail and commercial business lines

• Advanced Measurement Approach (AMA)

• Risk and control self assessment (RCSA) methods and loss data collection


The broad ranging implications of Basel II for the whole business

• Governance and oversight, and meeting the Basel objectives

• Sound credit processes

• Appropriate administration, measurement and monitoring of credit

Basel II and Internal Capital Adequacy Assessment Process (ICAAP)

• What is required from the ICAAP

• Development of an effective ICAAP framework

• Application of Pillar 2 requirements, including stress testing and capital add-ons

Appropriate systems and technologies

• Examples of IT architecture

• The layers of IT architecture necessary for a successful Basel implementation

A sample Basel Programme for a bank


Overview of the new Basel III regulations

• Improving the capital base

• Enhancing risk coverage

• The treatment of counterparty credit risk (CCR)

• The Leverage Ratio, and key elements for calculation

• Reducing procyclicality

• Treatment of systemic risk

Basel III: A new framework for management of liquidity risk

• The Liquidity Coverage Ratio (LCR)

• The Net Stable Funding Ratio (NSF)

Review of latest regulatory documentation, BIS releases and G20 agreements

• Timeline for international adoption

• Impact on the banking sector

What next for capital regulations?