Risk Management

Introduction

• The evolution of banking risk:
• Why the old Basel Accord was deemed necessary
• G30 report

Case study: Bankers Trust

• Why the new Basel Accord was deemed necessary
• Expected and unexpected losses and the role of capital.

The evolution of bank risk management

• From a cost centre to a strategic competitive weapon

The Basel Accord II - a brief overview

It is assumed that all delegates will have at least heard of the new Basel Accord. This section will summarise its implications for financial institutions, with particular attention to Pillars II and III.

• Objectives of the new Accord
• Application of the Accord
• To whom does it apply?
• Legal standing of the Accord and national discretions
• Structure of the new Accord
• Pillar I: minimum capital requirement
• What constitutes bank capital?
• Pillar II: supervisory review process- its objectives
• Construction of an ICAAP- an overview with examples
• What risks should be covered?
• How should the risks be assessed?
• The structure of the ICAAP
• Principle-based supervision - what is meant by this?
• Pillar III: market disclosure- what are the requirements and some issues
• Interaction with other regulatory requirements such as IFRS
• Will Pillar III remain?
• Procyclicality
• What has resulted from the banking crisis in 2007-9
• Has the Accord failed?
• Known and likely changes to the Accord