Risk Management: Regulation for Banks - Basel

The Basel Framework is a set of international banking regulations developed by the Basel Committee on Banking Supervision (BCBS). Its main purpose is to strengthen the resilience and financial stability of the global banking system by setting minimum capital, liquidity, and risk management standards for banks.

Since its inception in the late 1980s:

• Basel I, introduced in 1988, focused on minimum capital requirements for credit risk and was amended in 1996 to add market risk.

• Basel II introduced a more risk-sensitive approach, including operational risk.

• Basel III, developed in response to the 2008 financial crisis, significantly raised the quality and quantity of capital banks must hold. It introduced stricter definitions of capital, including a leverage ratio, Commont Equity Tier 1 (CET1) ratio and added capital buffres to absorb shocks. It also introduced two key liquidity standards (the Liquidity Coverage Ratio - LCR  and the Stable Funding Ration - NSRF).

• The reforms published in 2017 under the finalisation of Basel III (often referred to as Basel IV) aim to enhance the comparability of capital ratios across banks by reducing excessive variability in the calculation of risk-weighted assets (RWAs).

The methodology of this 3-day seminar is based on theoretical lectures, numerous practical exercises, interactivity and exchange of views, case studies.

The main objective of this course is to provide participants with a solid understanding of the interaction between regulation and risk management in banking. Given its foundational role in regulatory standards, the work of the Basel Committee on Banking Supervision constitutes a major focus of the course.The course also highlights how the Basel framework is implemented through EU legislation (such as the Capital Requirements Regulations and Directive - CRR/CRD) and further adapted by national supervisory authorities.

By the end of the programme, participants will understand the necessity for banks to meet the Basel requirements for capital, liquidity and leverage. The evolution of the regulatory framework for banks from Basel I to Basel IV, analysing its impact on risk management practices. Key calculations required under the Basel framework - including those related to stress testing and back-testing - are explained in detail.

Beyond the Basel standards, the course also addresses other key aspects of the interaction between regulation and risk management in the banking sector.

1. Risk Management: an Introduction

1.1. Risk Taxonomy: What are the Risks to be Considered?

1.2. What is Risk Management for a Bank?

1.2.1. Objectives
1.2.2. Balancing Risk and Return
1.2.3. How to Measure Risk?
1.2.4. Risk & Regulation

2. Risk and Regulation

2.1. Basel Committee on Banking Supervision

2.1.1. Context
2.1.2. Some Key Concepts
2.1.3. Basel Frame: 3 Pillars

2.2. International Regulatory Environment

3. Pillar 1 Risks: Credit, Market, Operational & Liquidity

3.1. Credit Risk

3.1.1. Description in Basel
3.1.2. Standardised Approach
3.1.3. IRB - Foundation & Advanced

3.2. Market Risk

3.2.1. Description in Basel
3.2.2. Standardised Approach
3.2.3. Internal Model Approach

3.3. Operational Risk

3.3.1. Description in Basel
3.3.2. Measuring Minimum Capital Requirements for Operational Risk
3.3.3. Latest Developments: Revised Standardised Approach

3.4. Liquidity Risk

3.4.1. Description in Basel
3.4.2. Measuring Liquidity Ratios: LCR and NSFR
3.4.3. Liquidity Risk & Pillar II: ILAAP Frame

4. Latest Developments

4.1. Basel III Finalisation 2017 Reform (or Basel IV)
4.2. ESG Iin the EU Regulatory Framework
4.3. Looking for the Holy Grail?
4.4. Conclusions

The course is designed for banking professionals from all types of banks, supervisory authorities, and other financial institutions, with at least 5 years of experience in a banking environment. Participants should already have a solid understanding of banking and/or risk management fundamentals. The course also welcomes young high potentials with a quantitative background who are preparing for more advanced responsibilities in the field of finance and risk management. It will be particularly relevant to risk managers, auditors, compliance officers and senior managers who need to understand and apply the Basel regulatory framework in practice.