DAY 1

Session 1 – Introduction – Banking 2020 with Hindsight

• Banking in Basel IV/CRD V – what can we expect? And what is the impact on Liquidity & Capital
• Recap of the impact of Basel III/CRD IV
• Why the need for a fourth accord? What is changing? Amendment to standardised & internal models
• Potential impact & links to the market environment and what does this mean for Treasury and ultimately strategy?

Exercise:

Consider a detailed Quantitative Impact Survey, relating to the impact of Basel IV/CRD V, discuss relevance to own market/institution and explore what practical steps the industry is taking to mitigate it

Session 2 – Impact of IFRS9 Impairment

• Motivations for IFRS 9 – Linking accounting to prudential regulation & Lessons from the crisis – were the profitable banks that went bust really profitable?
• From IAS 39 to IFRS 9 – prospective versus retrospective impairment
• Impact on ‘Standardised’ banks & impact on ‘IRB’ banks. Strategies to mitigate

Exercise:

Model the impact of IFRS9 impairment on a balance sheet which uses Standardised Approach and evaluate when applied on a contractual and behavioural basis

Session 3 – Focus on Fundamental Review of the Trading Book [FRTB]

• Overview of FRTB. Why the need for a fundamental review? Recap of Basel 2.5 and issues with Basel 2.5
• Highlights of FRTB. Capital against Expected Shortfalls, Hard bordering of trading book and banking book, Individual treatment of asset classes – holding periods etc.
• Overview of Default Risk Charge (DRC) and Non Modellable Risk Factors

Exercise:

Model Value at Risk [VaR] and Expected Shortfall [ES] for a simulated portfolio and consider practical challenges in implementation

Session 4 – Focus Standardised Approach for Counterparty Credit Risk [SA-CCR]

• Overview of Standard Approach to Counter Party Credit Risk Management [SA-CCR]. Recap on methodologies and rationale for change. Breaking down the model
• Calculation of Replacement Cost, Calculation of PFE multiplier and add-on’s and Operational impact and strategies to maximise

Exercise:

Calculate the exposure for a hedging set using the SA-CCR model and consider operational requirements to be able to do so

DAY 2

Session 5 – Deep dive on BIS 368 Interest Rate Risk in the Banking Book (IRRBB) Standards

• Modelling earnings sensitivity to IRRBB, Modelling equity sensitivity to IRRBB and Predicting and adjusting for convexity of profiles
• Overview and rationale for BIS 368
• Shocking interest rates – Parallel shock up and down, Short rate shock up and down – including exponential scaling and Steepener and flattener – including exponential scaling of long shock
• Shocking time bucketing – Adjusting from base prepayment rate to conditional prepayment rate and Adjusting from base redemption rate to conditional redemption rate
• Including IRRBB in Pillar 2 and Risk Appetite

Exercise:

Delegates will assess the sensitivity of earnings and EVE to interest rate shocks on a simulated banking book

Session 6 – Complying with [LCR] optimally

• Recap on Basel III Pillar I Liquidity Regime
• Liquidity Coverage Ratio in detail. The Numerator – What counts as HQLA? The Denominator – Calculating net outflows
• How to optimise – denominator lead strategies. Practical ways to optimise outflows & Practical considerations for classification of deposits

Exercise:

Calculate the LCR for a balance sheet and evaluate challenges in being compliant and best practice for overcoming these challenges and being compliant optimally

Session 7 – Complying with [NSFR] optimally

• Recap on Basel III Pillar I Liquidity Regime
• Net Stable Funding Ratio in detail. The Numerator – What counts as Available Stable Funding [ASF]? The Denominator – What counts as Required Stable Funding [RSF]?
• How Liquidity Coverage Ratio [LCR] and Net stable Funding Ratio [NSFR] work in harmony
• Operational challenges in calculation and compliance. Strategies to optimize

Exercise:

Calculate the NSFR for a balance sheet and evaluate challenges in being compliant and best practice for overcoming these challenges and being compliant optimally

Session 8 – Updates to Pillar 2 and Stress Testing

• Pillar II adequacy assessment process. ICAAP + ILAAP = ICLAAP. 7 principles of ‘good’ ICLAAP
• Final standards for stress testing
• The need for a total business approach – how are banks achieving this?

Exercise:

Consider a case study detailing how several banks are harmonizing Individual Adequacy Assessment Processes for Capital and Liquidity [ICAAP+ILAAP=ICLAAP] and discuss the applicability of these to their individual institutions

DAY 3

Session 9 – Case Study: FTP in Illiquid Wholesale Markets

• Review of FTP methodologies. Zero Cost/Average Cost & Maturity matched the liquidity
• Challenges presented by illiquid wholesale markets. Determining a swap curve & the maturity match liquidity premium
• Practical ways to develop proxies
• Using FTP effectively as an appetite statement/rudder to ‘steer the ship’

Exercise:

Consider a case study of an Eastern European bank operating, who’s the domestic wholesale market is illiquid. Determine proxy measures for constructing a swaps curve and liquidity premium curve. How the bank actually overcame these challenges to construct a maturity matched RTP curve will then be explored and discussed

Session 10 – IBOR Transition

• A brief history – The LIBOR/EURIBOR fixing process and scandal, The Wheatley report and recommendations and Issues with LIBOR/EURIBOR
• Why OIS is the right choice for the discount curve – Secured vs. unsecured and Desirable features of a ‘better’ Risk Free Rate [RFR]
• Challenges in replacing LIBOR
• Overview of SOFR and ESTER – Calculation processes, Building synthetic term rates and RFR plans in other currencies

Exercise:

Consider a case study of how European markets have adjusted for ESTER and how several European Banks have implemented the reforms.

Session 11 – Evolving Funds Transfer Pricing Models

• Adjusting to reflect the capital cost of funding & Adjusting to reflect regulatory cost e.g. LCR & NSFR
• Adjusting to reflect IFRS9 impairment
• What else can be reflected? Importance of balancing complexity with effectiveness

Exercise:

A maturity matched FTP curve adjusted for LCR and Capital charges will be derived and then applied to a balance sheet. Best practice for achieving this, based on how FTP methodologies of several banks are evolving to reflect these adjustments will then be discussed

Session 12 – Bank Treasury in a Digital World

• How has/is/will the digitalisation of banking impacted bank treasuries – Data Capture, Robotic Process Automation, Big Data and Blockchain
• Opportunities – Forecasting, Decision Support and Cycle Times
• Challenges – Operational Risk – Financial Crime, Cybercrime, systems failures and others, Competition and Mobility of Funding
• What is the regulatory view and how are they adjusting?

Exercise:

Case study of how a bank in Asia is utilizing digital innovation to enhance its group treasury center.

End of Programme

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