• January 12 - 14, 2009
• Location:  Hong Kong

WHAT DO I GET FROM THIS COURSE?

• What is Basel II?: A broad overview of modern risk management and capital adequacy, putting the new Accord in context
• Learn how to comply at the minimum possible cost and how to use compliance as a competitive advantage
• Discuss the new challenges for the board of directors and executive management
• A detailed look at modern operational risk management, including quantification, loss modelling, key risk indicators and practical methods for operational risk managers
• Latest thinking on approaches to stress testing and the pillar 2 obligations under Basel II
• Learn how different countries are implementing Basel II and take advantage of the menu approach, the options and national discretions
• Basel II: where next?

WHO SHOULD ATTEND?

• 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

COURSE SUMMARY

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 will begin by putting Basel II in context, examining the shortcomings of the original capital requirement directive and the development of the new risk-sensitive framework. The different approaches allowed under Basel II will be examined in detail, focusing on the areas which are receiving most attention from regulators.

Practical techniques for the management of operational risks within an organisation will be introduced and set against the Basel II requirements. The expert tutor will discuss the application of critical techniques such as Key Risk Indicators and risk measurement, looking at risk management strategies for extreme value events including stress testing and the construction of scoreboard solutions.

The application of advanced analytical techniques such as VaR, Monte Carlo simulations and Extreme Value Theory will be examined, with an emphasis on the advantages and limitations of each.

The expert tutor will look beyond Basel II and explore the common elements of different regulatory compliance projects and the benefits that can be gained by aligning these in your organisation. He will also give full coverage to the latest thinking in risk management and share his views about the future direction of the Basel II regulations.

What is Basel II?

Basel II is a new set of guidelines and regulations designed to set minimum levels of capital for internationally active banks in a risk sensitive manner. The New Basel Capital Accord framework specifies rules and requirements as to how these risk weights should be set for different assets, and how this should be regulated and reported.

It is changing the way financial institutions manage capital and make pricing decisions, and is now essential for anyone working in or with major financial institutions to be aware of these regulations and speak the common language of risk management.

A Note on Operational Risk

Operational risk is the risk of direct or indirect losses resulting from inadequate or failed internal processes, people and systems or from external events. It includes, but is not limited to, the risk of inadequate or failed internal systems such as computer failures or fraud, compliance issues, as well as external events, including lawsuits.

Fraud is a major component of operational risk.

The New Basel Capital Accord, more commonly known as Basel II, is fundamentally about improving risk and asset management to avoid financial disasters. Compliance requires banking institutions to have sufficient assets to offset any risk they may face.

From George Lekatis

Detailed Course Syllabus

Bank for International Settlements (BIS) and the First Basel Capital Accord

• The Basel Committee on Banking Supervision

• From the Young Plan (1930) to Basel II

• Regulatory supervision of internationally active banks

• The failure of the Bankhaus Herstatt and the crisis of confidence

• Regulatory and economic capital

• 1980s: The capital ratios of the main international banks are deteriorating

• Credit Risk: assets are weighted by factors

• On and off balance sheet engagements

• Examples of capital requirements

• December 1987: The Basel Capital Accord approved by the G10

The New Basel Capital Accord (Basel II)

• Realigning the regulation with the economic realities of the global banking markets; New capital adequacy framework replaces the 1988 Accord

• Improving risk and asset management to avoid financial disasters - "Sufficient assets" to offset risks

• Technical challenges for banks & supervisors

• How much capital is necessary to serve as a sufficient buffer?

• The three-pillar regulatory structure

• Purposes of Basel II and scope of application

• Pillar 1: Minimum capital requirements

• Credit Risk – 3 approaches; the standardized approach and two internal ratings-based (IRB) approaches

• Claims on corporates, sovereigns and banks

• Key concepts: PD - The probability of default, LGD - The loss given default, and EAD - Exposure at default

• Pillar 2: Supervisory review; key principles and aspects and issues of the supervisory review process

• Pillar 3: Market discipline; qualitative and quantitative disclosure requirements

Framework for internal control systems in banking organizations - Basel Committee on Banking Supervision

• The 13 Principles for the Assessment of Internal Control Systems, and COSO principles

• The control environment

• Risk assessment

• Control activities

• Information and communication

• Monitoring

• Types of control breakdowns typically seen in problem bank cases

• The objectives and role of the internal controls framework

• The major elements of an internal control process

• Evaluation of internal control systems by supervisory authorities

• Role and responsibilities of external auditors

• Supervisory lessons learned from internal control failures

Operational Risk

• What is operational risk?

• Legal risk, Information Technology operational risk, operations and operating risk

• The evolving importance of operational risk

• Quantification of operational risk

• Loss categories and business lines

• Identification of operational risk

• The Delphi method

Operational Risk Approaches

• Different approaches under Basel 2

• Implementation of Advanced Measurement Approach (AMA)

• Loss Distribution (LD) and Standard Normal Distribution

• "Fat Tails" in the normal distribution

• Expected loss (EL), Unexpected Loss (UL)

• Value-at Risk and Basel II

• Monte Carlo simulations and limitations

• Extreme Value Theory

• Scoreboards and Stress Testing under Basel

• Recognition of the firms’ own modelling of operational risk losses

• "Weak banks", internal and external audit and sound practices for operational risk

• Key Risk Indicators and Operational Risk Measurement Issues

• The game theory, the prisoner’s dilemma, and the connection with operational risk measurement and management

• Operational risk management , and key functions of OR managers, department heads and the OR office

• Internal and external audit

• Operational risk sound practices

• Operational risk mitigation and insurance

Third-party service providers and vendors

• Outsourcing services and Basel II

• Offshore outsourcing

• Key risks of outsourcing and what is needed from vendors and service providers

Basel II and other regulations

• Basel and other regulations; Capital Requirements Directive (CRD), Markets in Financial Instruments Directive (MiFID)

• What will be the impact of MiFID to non EU banks?

• Aligning Basel II operational risk and Sarbanes-Oxley 404 projects

• Common elements and differences of compliance projects

• Multinational companies and compliance challenges

Sign up now!