Basel II - Measuring and Managing Credit Risk

Tuesday, December 1

09.00 - 09.15  Welcome and Introduction

09.15 - 12.00  General Introduction to Basel II

• Background, Intentions and Scope
• The Three Pillars of Basel II
• The Risk Measurement Framework
• Basel II and the Global Credit Crisis
  • Why did Basel II not prevent the crisis?

Standardized Approach to Measuring Credit Risk

• General Rules
  • Individual claims
  • External credit assessments
• Credit Risk Mitigation
  • Overview of Credit Risk Mitigation Techniques
  • Collateral
  • On-balance sheet netting
  • Guarantees and credit derivatives
  • Maturity mismatches
• Workshop: Using the standardized approach

12.00 - 13.00  Lunch

13.00 - 16.30  The Internal Ratings-Based Approach

• Overview
• Mechanics of the IRB Approach
  • Categorization of exposures
  • Foundation and advanced approaches
  • Adoption of the IRB approach across asset classes
  • Transition arrangements
• Foundation Approach: Rules for Corporate, Sovereign and Bank Exposures
  • Risk-weighted assets
  • Risk components (PD, LGD, EA and M)
• Foundation Approach: Rules for Retail Exposures
  • Risk-weighted assets for retail exposures
  • Risk components
• Workshop: Estimating Risk Components and Capital Charge under the Foundation approach

Wednesday, December 2

09.00 - 09.15  Brief recap   

09.15 - 12.00  The Internal Ratings-Based Approach (continued)

• Advanced IRB Approach: Minimum Requirements
• Advanced IRB Approach: Rules for Corporate, Sovereign and Bank Exposures
  • Risk-weighted assets
  • Risk components (PD, LGD, EA and M)
• Advanced IRB Approach: Rules for Retail Exposures
  • Risk-weighted assets for retail exposures
  • Risk components
• Workshop: Estimating Risk Components and Capital Charge under the Advanced IRB approach
• Treatment of Equity Exposures under IRB
• Treatment of Purchased Receivables under IRB
• Recognition of Guarantees and Credit Derivatives under IRB
• Recognition of Provisions under IRB
• Validation of Internal Rating Systems

12.00 - 13.00  Lunch

13.00 - 16.00  Practical Implementation Issues and Outlook

• Systems and Data Requirements
  • Special Discussion: How are risk components estimated when there are no liquid stock markets or historical data?
• Organization, Procedures and Skills
  • Complying with the minimum requirements
• Regulatory review process (“Pillar II”)
  • Strengthening of the SREP to secure a more sound credit culture
• Managing/Optimizing the Capital Ratio
  • Integrating Basel II into an ERM Framework
  • Making money from Basel II compliance
• Discussion: How Has Basel II Affected the Banking Markets?
  • Who have been the losers and winners?
  • How will the three pillars function in the future?
  • Critiques of Basel II: Rules too complex and prescriptive? Too procyclical?

Evaluation and Termination of the Seminar