Basel III, risk and compliance management training

The Basel iii Compliance Professionals Association (BiiiCPA) develops and maintains four certification programs and many tailor-made training programs for directors, executive managers, professionals, consultants, vendors, service providers, auditors and legal counsels around the world. Subject matter experts review and update this body of knowledge.

For instructor-led training, you may contact Lyn Spooner at lyn@basel-iii-association.com explaining what you need, and we will contact you as soon as possible.

1. Certified Basel iii Professional (CBiiiPro)

Objectives

The seminar has been designed to provide with the knowledge and skills needed to understand the new Basel III framework and to work in Basel III Projects.

The course provides with the skills needed to pass the exam and become a Certified Basel iii Professional (CBiiiPro).

Target Audience

This course is intended for managers, professionals, consultants, service providers and vendors working for Banks, Financial Organizations, Financial Groups and Financial Conglomerates. They need to understand not only the new Basel III requirements, challenges and opportunities, but also the regulatory differences for branches and subsidiaries or their bank around the world.

This course is highly recommended for:

- Managers and Professionals involved in Basel III (decision making and implementation)
- Risk and Compliance Officers
- Auditors
- IT Professionals
- Strategic Planners
- Analysts
- Legal Counsels
- Process Owners

Course Synopsis

What is Basel III?

The Basel III papers
Was Basel II responsible for the market crisis?
Introduction to the Basel III Amendments
The Financial Stability Board (FSB), the G20 and the Basel III framework

1. The New Basel III Principles for risk management and corporate governance

The key areas where the Basel Committee believes the greatest focus is necessary

Board practices
Senior management
Risk management and internal controls
Compensation
Complex or opaque corporate structures
Disclosure and transparency

Sound Practices for the Management of Operational Risk

The 9 principles

2. The Quality of Capital

The numerator: A strict definition of capital
Limits and Minima
Common Equity Tier 1
Common shares issued by the bank
Additional Tier 1 capital
Tier 2 capital
Investments held by banks in capital instruments of other banks and financial and insurance entities
The corresponding deduction approach and the changes in the business model
Double Gearing and Basel III
Securitisation and Resecuritisation

3. The Risk Weighted Assets

The denominator: Enhanced risk coverage
Understanding securitization

4. The Capital Ratio

In addition to the quality of capital and risk coverage
Calibration
Transition period

5. Global Liquidity Standards

Introduction of global minimum liquidity standards
The Liquidity Coverage Ratio (LCR) that makes banks more resilient to potential short-term disruptions
Stock of high-quality liquid assets
Total net cash outflows
The Net Stable Funding Ratio (NSFR) that addresses longer-term structural liquidity mismatches
Available stable funding (ASF)
Required stable funding (RSF)
Contractual maturity mismatch
Concentration of funding
Available unencumbered assets
LCR by significant currency
Market-related monitoring tools
Transitional arrangements

6. Capital Conservation

Distribution policies that are inconsistent with sound capital conservation principles
Supervisors enforce capital conservation discipline

7. Leverage Ratio

Strong Tier 1 risk based ratios with high levels of on and off balance sheet leverage
Simple, non-risk-based leverage ratio
Introducing additional safeguards against model risk and measurement error
Calculation of the leverage ratio. The January 2014 amendment.

8. Countercyclical Capital Buffer

Procyclical or Countercyclical?
The new countercyclical capital buffer
Home / Host Challenges
Guidance for national authorities operating the countercyclical capital buffer
Principles underpinning the role of judgement
Principle 1: (Objectives)
Principle 2: (Common reference guide)
Principle 3: (Risk of misleading signals)
Principle 4: (Prompt release)
Principle 5: (Other macroprudential tools)
Jurisdictional reciprocity
Frequency of buffer decisions and communications
Treatment of surplus when buffer returns to zero
Interaction with Pillar 1 and 2

9. Systemically Important Financial Institutions (SIFIs)

SIFIs and G-SIFIs
Improvements to resolution regimes
Additional loss absorption capacity
More intensive supervisory oversight
Stronger robustness standards
Peer review
Developments at the national and regional level
The Financial Stability Oversight Council (FSOC)
The European Systemic Risk Board (ESRB)
Strengthening SIFI supervision

10. Systemically Important Markets and Infrastructures (SIMIs)

The Basel Committee and Financial Stability Board endorse central clearing and trade reporting on OTC derivatives
Derivative counterparty credit exposures to central counterparty clearing houses (CCPs)

11. Risk Modelling, Stress Testing and Scenario Analysis

Capture of systemic risk/tail events in stress testing and risk modelling
VaR shortcomings: the normality assumption
Need for a strong stress testing programme
Systemic risk capture in banks’ risk models

12. Stressed Value-at-Risk (S-VaR), Counterparty Credit Risk (CCR), Credit Valuation Adjustment (CVA), Wrong-Way Risk

Overview of the new requirements
Stressed Value-at-Risk (S-VaR)
Counterparty Credit Risk (CCR)
Credit Valuation Adjustment (CVA)
Wrong-Way Risk

Pillar 2 Amendments: Stress testing

Principles for sound stress testing practices and supervision
Use of stress testing and integration in risk governance
Stress testing methodologies
Scenario selection
Principles for sound stress testing practices and supervision
Firm-wide stress testing
15 stress testing principles for banks
6 stress testing principles for supervisors

Recognising the risk-mitigating impact of insurance in operational risk modelling

Insurance industry supervision
Banking supervisors’ assessment processes
Approval of insurance contracts
Revoking approval for recognising insurance mitigation in capital
Maximum 20% operational risk capital charge reduction
Modelling methodology
Traditional and proposed insurance policies
Criteria for recognising insurance mitigation
Partial insurance modeling

Understanding Supervisory Colleges

Good practice principles on supervisory colleges
Principles for both home and host supervisors
Principle 1: College objectives
Principle 2: College structures
Home supervisors, Host supervisors
Principle 3: Information sharing
Principle 4: Communication channels
Principle 5: Collaborative work
Principle 6: Interaction with the institution
Principle 7: Crisis management
Principle 8: Macroprudential work
Case Study: Committee of European Banking Supervisors, Joint decision on model validation

Basel III for international financial organizations

The Dodd-Frank Act in the USA and the Basel III framework
The Capital Requirements Directives (II, III, IV) of the European Union and the Basel III framework

The Impact of Basel III

Investment Banking, Corporate Banking, Retail Banking
Investment banks are primarily affected, particularly in trading and securitization businesses
The new capital rules have a substantial impact on profitability
Banks with insurance subsidiaries
Minority investments after Basel III
Interaction between Solvency II and Basel III
Regulatory Arbitrage after Basel III
Examples and Case Studies
Closing remarks

Reference - Islamic Banking and Basel III

Many Basel iii professionals need to have a good understanding of the Basel iii equivalent rules in Islamic Banking. This presentation is not necessary for the exam. There are no questions based on these slides.

Islamic Banking and Basel ii / Basel iii
Islamic finance has continued to expand its potential as a sustainable and stable form of financial intermediation
Basel iii is designed for conventional banks
Profit Sharing Investment Accounts (PSIA)
The Basel II / Basel III equivalent rules developed by the Islamic Financial Standards Board (IFSB) and the Islamic Development Bank (IDB)
The liquidity risk management and liquidity ratios challenge
The setting up of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Stability Forum (IFSF)
IFSB-13: Stress Testing principles
IFSB-12: Liquidity Risk
IFSB-10: Governance
Closing Remarks

2. Certified Pillar 2 Expert - Basel 3 (CP2E-B3)

Objectives

The seminar has been designed to provide with the knowledge and skills needed to understand better the Second Pillar of the Basel III framework and to work in Basel III Pillar 2 Projects.

The course provides with the skills needed to pass the exam and become a Certified Pillar 2 Expert - Basel 3 (CP2E-B3).

Target Audience

This course is highly recommended for:

- Managers and Professionals involved in the Second Pillar of Basel III (decision making and implementation)
- Risk and Compliance Officers
- Auditors
- IT Professionals
- Strategic Planners
- Analysts
- Legal Counsels
- Process Owners

Course Synopsis

The Second Pillar of Basel 2
Revised Core Principles for Effective Banking Supervision
From the Second Pillar of Basel 2 to the Second Pillar of Basel 3
The new ICAAP
Basel III Pillar 2 Guidelines
Basel III Pillar 2 Guidelines and Case Studies in the USA
Basel III Pillar 2 Guidelines and Case Studies in the EU
Basel III Pillar 2 Guidelines and Case Studies in the G20 countries
Basel III Pillar 2 Guidelines and Case Studies in Other Countries

Notes:

The US, EU and UK rules implementing Basel III follow many aspects of Basel III closely, but there are so many differences in approach in several key areas. Many G20 countries choose options and national discretions that make them “materially non-compliant” or “largely compliant” with Basel III. We organize in-house instructor-led training in major financial organizations, where we tailor the program to meet specific requirements.
It is highly recommended to study the Certified Basel iii Professional (CBiiiPro) Program before the Certified Pillar 2 Expert - Basel 3 (CP2E-B3) Program.

3. Certified Pillar 3 Expert - Basel 3 (CP3E-B3)

Objectives

The seminar has been designed to provide with the knowledge and skills needed to understand the Third Pillar of the new Basel III framework and to work in Basel III Projects.

The course provides with the skills needed to pass the exam and become a Certified Pillar 3 Expert - Basel 3 (CP3E-B3).

Target Audience

This course is highly recommended for:

- Managers and Professionals involved in the third Pillar of Basel III (decision making and implementation)
- Risk and Compliance Officers
- Auditors
- IT Professionals
- Strategic Planners
- Analysts
- Legal Counsels
- Process Owners

Course Synopsis

Revised Pillar 3 disclosure requirements
Introduction
Guide for disclosure of Pillar 3 information
Scope of application
Implementation date
Reporting location
Frequency and timing of disclosures
Assurance of Pillar 3 data
Proprietary and confidential information
Guiding principles for banks’ Pillar 3 disclosures
Principle 1: Disclosures should be clear
Principle 2: Disclosures should be comprehensive
Principle 3: Disclosures should be meaningful to users
Principle 4: Disclosures should be consistent over time
Principle 5: Disclosures should be comparable across banks
Presentation of the disclosure requirements
Templates and tables
Templates with a fixed format
Templates/tables with a flexible format
Signposting
Qualitative narrative to accompany the disclosure requirements
Format and reporting frequency of each disclosure requirement
Overview of risk management and RWA
Linkages between financial statements and regulatory exposures
Credit risk
General information about credit risk
Credit risk mitigation
Credit risk under standardised approach
Credit risk under internal risk-based approaches
Counterparty credit risk
Securitisation
Quantitative disclosure - description of a bank’s securitisation exposures
Quantitative disclosure – calculation of capital requirements
Market risk
Operational risk
Interest rate risk in the banking book (unchanged)
Abbreviations

Pillar 3 disclosure requirements for remuneration
Background and objectives
Pillar 3 disclosure requirements
Scope of application
Method and frequency of disclosure
Key disclosures

Composition of capital disclosure requirements
Introduction
Post 1 January 2018 disclosure template
Reconciliation requirements
Main features template
Other disclosure requirements
Template during the transitional period

Global systemically important banks: updated assessment methodology and the higher loss absorbency requirement
Introduction
Methodology for assessing systemic importance of G-SIBs
A. Indicator-based measurement approach
B. Sample of banks
C. Bucketing approach
D. Supervisory judgment
E. Periodic review and refinement
F. Disclosure requirements
The magnitude of the higher loss absorbency requirement and its impact
Instruments to meet the higher loss absorbency requirement
Interaction with other elements of the Basel III framework

Liquidity coverage ratio disclosure standards
Introduction
Disclosure requirements
Guidance on additional disclosures

Basel III leverage ratio framework and disclosure requirements
Introduction
Disclosure requirements
Implementation date, frequency and location of disclosure
Disclosure templates
Summary comparison table
Common disclosure template and explanatory table, reconciliation and other requirements
Basel III Pillar 3 Guidelines in the USA
Basel III Pillar 3 Guidelines in the EU
Basel III Pillar 3 Case Studies

4. Certified Stress Testing Expert - Basel 3 (CSTE-B3)

Objectives

The seminar has been designed to provide with the knowledge and skills needed to understand the new Financial Stress Testing requirements of the Basel III framework and to work in Basel III Projects.

The course provides with the skills needed to pass the exam and become a Certified Stress Testing Expert - Basel 3 (CSTE-B3).

Target Audience

This course is highly recommended for:

- Managers and Professionals involved in Financial Stress Testing after Basel III (decision making and implementation)
- Risk and Compliance Officers
- Auditors
- IT Professionals
- Strategic Planners
- Analysts
- Legal Counsels
- Process Owners

Course Synopsis

The Basel III papers
Stress Testing Before and After the Crisis
Basel III Stress Testing Guidelines
Basel III Stress Testing Guidelines and Case Studies in the USA
Basel III Stress Testing Guidelines and Case Studies in the EU
Basel III Stress Testing Guidelines and Case Studies in the G20 countries
Basel III Stress Testing Guidelines and Case Studies in Other Countries

Notes:

The US, EU and UK rules implementing Basel III follow many aspects of Basel III closely, but there are so many differences in approach in several key areas. Many G20 countries choose options and national discretions that make them “materially non-compliant” or “largely compliant” with Basel III. We organize in-house instructor-led training in major financial organizations, where we tailor the program to meet specific requirements.
It is highly recommended to study the Certified Basel iii Professional (CBiiiPro) Program before the Certified Stress Testing Expert - Basel 3 (CSTE-B3) Program.