November 12 - 14, 2024

Bank Capital Management

Economic Capital, Funds Transfer Pricing and RAROC

Register Now Agenda Program Online
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Prague, NH Hotel Prague
€ 1,755 + VAT
Hybrid Training
Both classroom and online training available
Price for online training
€ 1,316
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Key points / questions answered:

Understanding the Role of Banks Capital
Articulating Capital, Risk and Return
Risk Identification, Measurement and Aggregation
Regulatory and Economic Capital Assessment
Internal Funds and Risk Transfer Pricing
Risk-Adjusted Performance Measurement and Monitoring
Current Issues and Concerns

The purpose of this seminar is to give you a clear understanding of what is banks capital, why it is crucial and how to use it to create value. Banks are managed using two desynchronized steering wheels: The regulatory framework that ignores profitability, and the financial framework, quite disconnected from risk issues. The evolution of the banking environment, IFRS 9, FinTech, Covid, etc. requires banks to manage more dynamically their capital. This seminar clarifies for you the issues and the practical ways to handle them. The seminar consists of six study sessions.

The six sessions are articulated as follows. We start by clarifying the nature of capital and why you need capital to take risks. Then we look at risks, how to identify and classify them, and how to measure them properly. We then articulate risk and return measures to provide transactions pricing and efficient performance indicators. More specifically:

Session 1 starts with the exploration of the different capital metrics: Regulatory, accounting and economic. We look at the components of capital, their “raison d’etre” and capital planning.

Session 2: Once the articulation between capital and risk is clearly defined, we address the issues of risk appetite and tolerance, capital usage and allocation. We discover the RICAP, the process used to identify, hunt and classify risks.

Session 3 is dedicated to Economic Capital, the economic measure of risks. It is a neutral and transverse risk metrics, applicable to all measurable risks, and it ultimately provides the level of capital needed to cover each risk.

Session 4 looks at how to link Economic Capital to profitability and capital measures, in order to provide powerful top to bottom performance measures and efficient management decisions support.

Session 5 addresses the intricacies of funds transfer pricing, or how to move capital, risks and funds inside the bank so that performance indicators remain relevant and efficient from the business level, down to the transaction level.

Session 6 deals with how to combine risk and return measures to the pricing of transactions (RAROC); and to conclude the seminar, we address the current issues and concerns related to bank’s capital management.
PDF brochure with all details about the Bank Capital Management seminar is available on request.

Program of the seminar: Bank Capital Management

The seminar timetable follows Central European Time (CET).

09.00 - 09.15 Welcome and Introduction

09.15 - 12.15 Session One

The Nature and Utility of Banks Capital

  • Why do banks need capital?
  • The regulatory, accounting and economic views of capital
  • Capital regulation from Basel 1 to Basel 4 and beyond
  • Accounting capital, its components and the role of equity
  • Economic capital and value creation
  • Capital allocation and financial planning

Capital Planning and Risk management

  • Fundamental components of capital planning
    • Internal control and governance
    • Capital policy and risk capture
    • Forward-looking view
    • Management framework for preserving capital
  • Benefits of capital management
    • Risk strategies, diversification, market share, pricing

12.15 - 13.15 Lunch break

13.15 - 16.30 Session Two

The Articulation between Capital and Risk

  • Capital as a means to take risks and generate profits
  • Risk appetite objective and indicators
  • Risk tolerance logic
  • Risk, return and capital, the magic triangle
  • Assessing added value
    • Economic Profit
    • RAROC and Economic Value Added

Foundations of Risk Management

  • A brief history of Risk Management
  • The RICAP process
    • Risk hunting and identification
    • Risk taxonomy
  • Game on all issues covered during day 1

09.00 - 09.15 Review and warm up

09.15 - 12.15 Session Three

Economic Capital Concepts

  • Foundations of Economic Capital
    • The seven guidelines
  • Implementation steps
    • Articulation with Basel Pillar 2
    • Articulation with Finance/IFRS 9

Economic Capital Assessment

  • Steps to measuring Economic Capital
    • Risk Capital as standalone risk measure
    • Economic Capital as Marginal risks measure
  • Measuring credit risk
    • Basel 2/3 formula analysis
    • Credit Var and concentration
  • Measuring market risks
    • Balance sheet and trading risks
    • Interest rate, FX, equity, spread and other market risks
  • Measuring operating and other risks
  • Aggregating risks
    • Managing inter risks correlations

12.15 - 13.15 Lunch break

13.15 - 16.30 Session Four

Economic Capital in Practice

  • Expected results and interpretation
    • Business models and risk profiles
  • Articulating Economic and Regulatory Capital
    • Perimeters and severity level
    • Risk coverage and methodologies
  • Organization of the Economic Capital team
    • Required functions, committees and IT support
  • Benchmarks and review of banks disclosures

Case study: Dexia

  • The rise and the fall: facts and figures
  • Analysis and lessons

Session Five

09.00 - 09.45 Economic Capital Exercise Review and Discussion

10.00 - 12.15 Funds Transfer Pricing

  • Organization of the ALM, the nuclear reactor of the bank
  • Commercial and Financial margins
  • Steering of the Commercial margin
  • Steering of the Financial margin
  • Pricing internal funding using Reference refinancing

12.15 - 13.15 Lunch break

13.15 - 16.30 Session Six

RAROC, Macro-prudential Regulation

    • Different types of Risk Adjusted measurement
    • Analysis of RAROC components
    • Live exercise
  • Discussion of macro-prudential regulation issues
    • Can bank still measure their risk properly?
    • What impact of the banking regulation on the economy?
    • Moral hazard and the future of regulation

Final Game and Termination of the Seminar

Location and Registration



The seminar will be held in an attractive destination in the very heart of Europe.

More Information

Hybrid Training Seminar

The seminar will also be held globally online on the same dates as the in-class event.


Registration Deadline

October 29, 2024

Register Now
Training catalogue in PDF
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