Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Author: Korki Whitaker Revised: 02/17/2007.

Slides:

Advertisements

Similar presentations

Operational Risk Questionnaire

Advertisements

Page 1 Risk Management in Banking. Page 2 An Introduction to Risk Risk Management Risk Management is the process of measuring or assessing the actual.

Market Risk Cheryl J. Rathbun Citigroup Chief Operating Officer

Presented by Avneesh kumar.  Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel.

Operational risk. Introduction During the early part of the decade, much of the focus was on techniques for measuring and managing market risk. As the.

Basel I, Basel II, and Solvency II Chapter XII. The Reasons for Regulating Banks The purpose is to ensure banks keep enough capital for the risks they.

FSVC/Central Bank of Libya Seminar - January Day 3 Establishing a Modern Risk Management Department Basel II and Bank Risk Management Garrett R.

Capital Adequacy Chapter 20 © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin.

PRUDENTIAL NORMS The norms which are to be followed while investing funds are called "Prudential Norms." They are formulated to protect the interests of.

Insight into Risk Management Richard Allen - CVA Market Risk Manager.

This project is co-funded by the European Union and the Government of Jamaica 1 EQUITY financing for your business TRAINING ROOM JAMAICA TRADE & INVEST.

Portfolio Margining James Barry, Executive Director Collateral and Margin Services.

Canadian Chartered Banks – Example of RBC

Regulation, Basel II, and Solvency II

1 An Integrative Approach to Managing Credit Risks Based on Crouhy, Galai, Mark, Risk Management, McGraw- hill,2000, (ch. 9)

1 Operational Risk Management Member Education Series Seminar Indian Institute of Banking & Finance Nagpur November 2005.

RISK MANAGEMENT PRESENTATION ON CREDIT RISK MARKET RISK AND By

1 The Risk Management of Commercial Banks: Thailand’s Experience Suchada Dejtrakul Bank of Thailand ASEAN+3 Workshop on Reform and Development of Banking.

Oracle’s BASEL II Solution Bucuresti 24 th February 2004 Pal Ribarics Oracle Financial Services Consulting, EU Enlargement Countries Solution Team.

Operational Risk Chapter 18

The Basel Committee’s Approach

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Silicon Flat Irons June 5, 2009 Kimberly D. Krawiec.

Basel II and Bank Risk Management

Management of a Bank’s Equity capital Position

Basel II Impact on banking processes ISACA Roundtable 2 November 2009 Ronald Holsbeeke RA RE CIA CISA.

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter Fifteen The Management of Capital.

Chapter Fifteen The Management of Capital Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

Basel 2: Current Status Phil Rogers, HSBC Bank Credit and Risk 25 July 2006.

McGraw-Hill/Irwin 20-1 © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Importance of Capital Adequacy Absorb unanticipated losses and preserve.

Recap What is Money Laundering? Process of Money Laundering The Anti Money Laundering Network Recommends the Terms Legal Considerations & Money Laundering.

Regulatory Convergence under Post Basel II: some comments Giovanni Majnoni Contractual Saving Conference Washington, DC, May 1, 2002.

CIA Annual Meeting LOOKING BACK…focused on the future.

Measuring & Evaluating Bank Performance

1 BASEL II: ONE CREDIT ANALYST’S PERSPECTIVE Presented November 9, 2004 in Quito, Ecuador, on the occasion of the 10th anniversary celebration of ECUABILITY.

OpRisk Europe – April 2006 Compliance & Capital, or ‘MiFID and the CRD’ ISDA Copyright ® 2006 International Swaps and Derivatives Association,

Operations in Banking & Financial Services. The Changing Banking Paradigm External drivers compel banks to leverage the developments in Information Technology.

CHAPTER FOURTEEN The Management Of Capital The purpose of this chapter is to discover why capital – particularly equity capital – is so important for.

Credit risk vs. Market risk Credit risk is the risk that a borrower or counterparty may fail to fulfill an obligation whereas market risk is the risk to.

Chapter One: Analyzing and Managing Banking Risk 1.1 Bank Exposure to Risk Banking risks fall into four categories (Fig. 1.1): A. Financial Risks (Pure.

Credit risk in banks - importance of appraisal and monitoring PRESENTED BY : KRATI VERMA (09bshyd0390)

THE RISK A BANK TAKES EVERY DAY. INTRODUCTION Every day a bank opens its door for business they are taking risks. Risks are a part of any business. The.

CHAPTER Three The Management Of Capital. Tasks Performed By Capital Provides a Cushion Against Risk of Failure Provides Funds to Help Institutions Get.

 Bessis (2002) posit that liquidity risk refers to three (3) multiple dimensions: inability to raise funds at normal cost; market liquidity risk and asset.

Portfolio Management Unit – IV Risk Management Unit – IV Risk Management.

1  The objective of operational risk management is the same as for credit, market and liquidity risks that is to find out the extent of the financial.

Chapter 15: Financial Risk Management: Concepts, Practice, & Benefits

Basel Committee Norms. Basel Framework Basel Committee set up in 1974 Objectives –Supervision must be adequate –No foreign bank should escape supervision.

Capital Management & Profit Planning

Operational Risk. Introduction operational risk has proved to be an important cause of financial losses. Indeed, most financial disasters can be attributed.

Management of Operational Risk. Regulatory Capital Perspective Credit Risk – Basel I (1987) Market Risk – (Amendment 1998) Credit Risk – Basel II (2005)

1 COMMERCIAL BANK MANAGEMENT 1. 2 MEASURING AND EVALUATING THE PERFORMANCE OF BANKS PERFORMANCE REFERS TO HOW ADEQUATELY A BANK MEETS THE OBJECTIVES IDENTIFIED.

Ch6 Liquidity and Operational Risk. Liquidity risk In finance, liquidity risk is the risk that a given security or asset cannot be traded quickly enough.

Presented By: Manish Gidwani 10 Kapil Israni 16

Presented by: Dr. Peter Larose. Key Components of Credit Risk under Basel II Credit Risk Elements Transaction Risk Borrower’s RiskExposure Risk The.

Need for Regulation. Rationale for Regulation of Banking Sector Social objectives Confidence building need for banking sector Protect existing/probable.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.1 CHAPTER 3 Depository Institutions.

Factors to be considered for the Internal Auditors

Unit-2 Risk in Banking Business

Capital Regulations and Management Chapter 6

Operational Risk.

Equity Risk Bishesh Prajapati.

CHAPTER FOURTEEN The Management Of Capital

Operational Risk Chapter 20

L1: Introduction to Risk Management

Christopher Irwin Taipei October 17, 2001

Presentation transcript:

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Author: Korki Whitaker Revised: 02/17/2007

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Pillar 2 – Supervisory Control Pillar 3 – Market Discipline BASEL II formulates a set of broad supervisory standards and guidelines developed by an international group, the BASEL Committee on Banking Supervision. The G-10 members and Luxemburg and Spain make up the Committee.

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Pillar 1 addresses the maintenance of regulatory capital calculated for three major components of risk. 3. Market Risk – preferred measurement is Value at Risk (VaR) 1. Credit Risk measured through one of the following: Standardized Approach Foundation IRB (Internal Ratings Based) Approach Advanced IRB Approach 2. Operational Risk measured through one of the following: Basic Indicator Approach (BIA) Standardized Approach (TSA) Advanced Management Approach (AMA)

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). Examples of Credit Risk: Consumer credit risk Commercial (business) credit risk Counterparty risk Sovereign risk (the risk of a government becoming unwilling or unable to meet its loan obligations )

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events The following lists the official Basel II defined event types with some examples for each category: Internal Fraud - misappropriation of assets, tax evasion, intentional mismarking of positions, [bribery] External Fraud- theft of information, hacking damage, third-party theft and forgery Employment Practices and Workplace Safety - discrimination, workers compensation, employee health and safety Clients, Products, & Business Practice- market manipulation, antitrust, improper trade, product defects, fiduciary breaches, account churning Damage to Physical Assets - natural disasters, terrorism, vandalism Business Disruption & Systems Failures - utility disruptions, software failures, hardware failures Execution, Delivery, & Process Management - data entry errors, accounting errors, failed mandatory reporting, negligent loss of client assets

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Market risk is the risk that the value of an investment will decrease due to moves in market factors. The four standard market risk factors are: Equity risk, the risk that stock prices will change. Interest rate risk, the risk that interest rates will change. Currency risk, the risk that foreign exchange rates will change. Commodity risk, the risk that commodity prices (e.g. grains, metals) will change.

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 1 – Addressing Risk Types of calculations found within Pillar I include: Treatment of double default Standard risk weighted assets Probability of default Loss given default Exposure at Default Expected Loss and Provisions Others

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 2 addresses ‘residual’ risk – any other additional type of risk a bank may face. Residual Risk includes such risks as: Pillar 2 gives regulators additional tools to analyze risks identified in Pillar Systemic Risk 2. Pension Risk 3. Liquidity Risk Pillar 2 – Supervisory Control Pillar 2 includes such calculations and analysis such as: Portfolio Exposure Outstandings Analysis Operational Risk Loss Assessment/Analysis Non-performing Loan Analysis Location Exposure Credit Loss Allowance Analysis

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts Pillar 3 – Market Discipline Pillar 3 sets up reporting details that will allow counterparties to a bank’s risk and the market in general determine how risky a particular bank might be. Pillar 3 includes such calculations and analysis such as: Capital Structure Capital Adequacy Allowance for Credit Loses Credit Risk IRB Credit Risk Mitigation More

Corliss Whitaker: Portfolio – Instructional Presentation Understanding BASEL II Concepts References: Wikipedia: Basel IIBasel II Bank for International Settlements: Basel II: Revised international capital frameworkBasel II: Revised international capital framework Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version Bank for International Settlements: Operational RiskWikipedia: Credit RiskWikipedia: