Basel III and Stress Testing

In-person teaching Classroom

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This Basel III and Stress Testing course provides participants with an overview of Basel III, why it was introduced and the evolution of the requirements from Basel I.

It explains why it is necessary and how it is being implemented by regulators. The course also looks at the various elements of IMF stress testing and the different approaches that can be adopted.

Suitability

This course is for individuals with a basic understanding of banking and the financial markets.

Learning Outcomes

At the end of this course participants should understand:

How banking risk is measured and regulated
The implications of Basel III and the current regulatory landscape
The importance and process of stress testing

Course Content

The importance of banking regulation

Consequences of the financial crisis
Bank balance sheet structure
The ‘shock absorber’ and regulatory capital

Measuring risk

Banking book VS trading book
Counterparty credit risk, Var and expected shortfall
Current regulatory landscape

Overview of Basel I

The risk asset ratio and gearing ratio

Overview of Basel II

The three pillars
The leverage ratio and ‘cost of balance sheet’

Overview of Basel III

Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
High Quality Liquid Assets (HQLA)

Exercises: Calculating regulatory capital

IMF Stress Testing

Accounting-based VS market price VS macro-financial approach
Aggregate exposures, systematic factors and endogenous risk
Statistical VS structural macro models and pre-crisis stress test weaknesses

Exercises: Group discussions on stress test scenarios

Comprehensive Capital Analysis and Review (CCAR)

BIS recommendations and CCAR scenarios

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