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Provided by: FitchTraining Liquidity Risk Management in BanksAccounting and Finance |
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Training
Provided by FitchTraining
A two-day case study based workshop offering a structured approach to the analysis of liquidity challenges in banks, incorporating both lessons learned from the crisis and Basel guidelines for sound liquidity management.
Related Awards, Degrees or Certifications: Earn CPD credits
We are an accredited training provider with a number of institutions including:
ACCA
NASBA
Securi
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Liquidity Risk Management in Banks
Course Objectives
Liquidity risk has been one of the main drivers of the current credit crisis. This workshop will give an overview of the challenges and recommendations for liquidity risk management going forward.
Participants will be equipped to:
Review liquidity management lessons learned from the current crisis
Use a structured approach to assess liquidity risk management, asset and liability management and funding strategy
Understand how banks forecast, control and stress-test their liquidity sources and uses (on and off balance sheet) and build a contingency funding plan to address stress cash outflows
Identify banks with weak liquidity and contingency planning within the context of the bank s role within the financial system
Anticipate changing regulations and supervisory guidance on the management of bank liquidity
Target Audience
Regulators, analysts, risk and banking professionals who need to better understand the liquidity risk management challenges and strategy within a bank. The course is targeted at an intermediate level and assumes a basic understanding of banking products and services. Related workshops include: Risk Management in Banks & the Capital Implications, which provides a broader overview of all risk management areas.
Content
ANALYTIC OVERVIEW
Defining liquidity risk: funding and market liquidity
Key drivers: asset liquidity and funding needs, funding strategy
Impact of liquidity crisis: deposits, creditors and systemic issues
Fundamental principles (Basel Principle 1): risk management framework within the overall risk management of a bank
Inter-relationship between liquidity, credit, market, operational, legal and reputation risks
Supervisory role: expectations and remedial actions.
GOVERNANCE
Liquidity risk tolerance (Basel Principle 2) given different business models, e. g. retail and wholesale banks, multi-nationals and investment banks
Strategies, policies and practices (Basel Principle 3)
Liquidity costs, benefits and risks (Basel Principle 4)
Early warning signals of unacceptable risk tolerance
Banks which failed due primarily to weak liquidity management.
ASSET LIQUIDITY AND FUNDING NEEDS
Identifying and forecasting needs
Asset and liability management goals: practical considerations
Defining minimum risk assets and liquid assets
Key matrices to measure asset liquidity and funding needs
Forecasting funding needs: key assumptions of asset growth, inflows and outflows, contingency funding needs
Collateral assessment: haircuts / margin, available collateral for access to funding, client balances, Central Bank eligibility criteria
Stress liquidity needs
Early warning signals: illiquidity spirals, institution specific and market wide stress scenarios
Interaction between liquidity and other risks: market and credit risk, interest rate, legal, operational and reputation risks
Systemic risk and impact on market and funding liquidity
Stress-tests: key scenarios relating to business activities, products and funding sources
Trigger events: rating changes, market disruption, trigger events in a securitisation
Case studies: comparing asset liquidity profiles of strong and weak banks.
FUNDING STRATEGY
Asset and liability Management
Funding appropriate for the risk profile and commercial needs of the assets, products and business lines
Issues: stability, diversity and tenor matching of funding sources
Refinancing risk of bonds and money market funding
Key issues: off balance sheet, derivatives, securitisation, intraday
Gap management across tenor and currency buckets
Cash capital techniques to fund illiquid assets and stress outflows
Key matrices for measuring funding strategy and refinancing risk
Forecasting funding cash-flows over different time horizons: intraday, day to day, under and over a year
Case studies: weak funding strategies and gap management
Contingency funding plan and stress-testing
Stress-testing market access, stress market outflows
Contingency funding plan: sufficient liquidity to meet the potential demands of stress outflows
Back up liquidity: unencumbered assets, liquidity pool, committed facilities, Central Bank s marginal lending facilities
Case studies: comparing strong and weak banks under stress
Monitoring and controls
Funding and liquidity mismatch limits across legal entities, business lines, currencies and jurisdictions
Cumulative contractual cash-flow mismatch limits, based on risk tolerance, balance sheet size, depth of market, funding structure
Operational management of intraday payments and settlements: due diligence.
SUPERVISION
Inter-relationship between liquidity regulation, capital adequacy and other prudential measures
Comparison across regulatory regimes: qualitative and quantitative standards
Liquidity risk tolerance given systemic risk: importance of bank within payment and settlement systems
Role of deposit insurance in a liquidity crisis
Regulatory responses to liquidity problems: guarantees, insurance, recapitalisation, bad banks
Remedial actions: required actions from bank to strengthen liquidity risk management and contingency planning, restrictions
Due diligence synopsis
Basel II: pillar III disclosure requirements on liquidity.
Liquidity risk has been one of the main drivers of the current credit crisis. This workshop will give an overview of the challenges and recommendations for liquidity risk management going forward.
Participants will be equipped to:
Review liquidity management lessons learned from the current crisis
Use a structured approach to assess liquidity risk management, asset and liability management and funding strategy
Understand how banks forecast, control and stress-test their liquidity sources and uses (on and off balance sheet) and build a contingency funding plan to address stress cash outflows
Identify banks with weak liquidity and contingency planning within the context of the bank s role within the financial system
Anticipate changing regulations and supervisory guidance on the management of bank liquidity
Target Audience
Regulators, analysts, risk and banking professionals who need to better understand the liquidity risk management challenges and strategy within a bank. The course is targeted at an intermediate level and assumes a basic understanding of banking products and services. Related workshops include: Risk Management in Banks & the Capital Implications, which provides a broader overview of all risk management areas.
Content
ANALYTIC OVERVIEW
Defining liquidity risk: funding and market liquidity
Key drivers: asset liquidity and funding needs, funding strategy
Impact of liquidity crisis: deposits, creditors and systemic issues
Fundamental principles (Basel Principle 1): risk management framework within the overall risk management of a bank
Inter-relationship between liquidity, credit, market, operational, legal and reputation risks
Supervisory role: expectations and remedial actions.
GOVERNANCE
Liquidity risk tolerance (Basel Principle 2) given different business models, e. g. retail and wholesale banks, multi-nationals and investment banks
Strategies, policies and practices (Basel Principle 3)
Liquidity costs, benefits and risks (Basel Principle 4)
Early warning signals of unacceptable risk tolerance
Banks which failed due primarily to weak liquidity management.
ASSET LIQUIDITY AND FUNDING NEEDS
Identifying and forecasting needs
Asset and liability management goals: practical considerations
Defining minimum risk assets and liquid assets
Key matrices to measure asset liquidity and funding needs
Forecasting funding needs: key assumptions of asset growth, inflows and outflows, contingency funding needs
Collateral assessment: haircuts / margin, available collateral for access to funding, client balances, Central Bank eligibility criteria
Stress liquidity needs
Early warning signals: illiquidity spirals, institution specific and market wide stress scenarios
Interaction between liquidity and other risks: market and credit risk, interest rate, legal, operational and reputation risks
Systemic risk and impact on market and funding liquidity
Stress-tests: key scenarios relating to business activities, products and funding sources
Trigger events: rating changes, market disruption, trigger events in a securitisation
Case studies: comparing asset liquidity profiles of strong and weak banks.
FUNDING STRATEGY
Asset and liability Management
Funding appropriate for the risk profile and commercial needs of the assets, products and business lines
Issues: stability, diversity and tenor matching of funding sources
Refinancing risk of bonds and money market funding
Key issues: off balance sheet, derivatives, securitisation, intraday
Gap management across tenor and currency buckets
Cash capital techniques to fund illiquid assets and stress outflows
Key matrices for measuring funding strategy and refinancing risk
Forecasting funding cash-flows over different time horizons: intraday, day to day, under and over a year
Case studies: weak funding strategies and gap management
Contingency funding plan and stress-testing
Stress-testing market access, stress market outflows
Contingency funding plan: sufficient liquidity to meet the potential demands of stress outflows
Back up liquidity: unencumbered assets, liquidity pool, committed facilities, Central Bank s marginal lending facilities
Case studies: comparing strong and weak banks under stress
Monitoring and controls
Funding and liquidity mismatch limits across legal entities, business lines, currencies and jurisdictions
Cumulative contractual cash-flow mismatch limits, based on risk tolerance, balance sheet size, depth of market, funding structure
Operational management of intraday payments and settlements: due diligence.
SUPERVISION
Inter-relationship between liquidity regulation, capital adequacy and other prudential measures
Comparison across regulatory regimes: qualitative and quantitative standards
Liquidity risk tolerance given systemic risk: importance of bank within payment and settlement systems
Role of deposit insurance in a liquidity crisis
Regulatory responses to liquidity problems: guarantees, insurance, recapitalisation, bad banks
Remedial actions: required actions from bank to strengthen liquidity risk management and contingency planning, restrictions
Due diligence synopsis
Basel II: pillar III disclosure requirements on liquidity.
About The Training Provider: FitchTraining
FitchTraining - Fitch Training is a specialist training firm focused on the provision of credit and corporate finance training. Courses are offered in three areas: financial institutions, corporate credit and securitization. Fitch Training is part of Fitch Solutions, a division of the Fitch Group. We also work in partnership with Fitch Solutions to provide quantitative training.
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