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Risk Management
Total risk management is the combination of all the elements of risk management into a consistent strategy...
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Training - Commercial Banking
Risk Management in commercial banks –
Overview of Basel II:
2 days
The objective of risk management is to identify, assess and
manage the spectrum of risks to which the Bank is exposed to
control the impact of adverse occurrences within acceptable
risk parameters. In so doing, risk management protects the
balance sheet and the Bank’s favourable domestic and
international credit rating, which is a vital consideration in
accessing low-cost funding.
Risk management also supports the Bank’s corporate strategic
goals and key management focus areas, which are:
· accountability and diligence
· management of change
· client relations and partnerships
· communication and awareness
· funding and financing
· business renewal
· research and development.
The Bank’s risk management capacity was strengthened during
the year under review. The development of risk management has
improved the organisation’s confidence to develop new business
initiatives, with capacity for timely risk assessment and
mitigation of proposed products and instruments before
implementation.
Risk management structure
Risk is managed and monitored within a risk management
framework by the committees of the Board, executive and
operational management, the independent risk and compliance
functions, and the risk management functions of the
operational units. Guided by policies approved by the Board,
and supported and monitored by a dedicated centralised risk
management unit that focuses on credit risk, the risk
management functions are integrated within the business and
operational activities where the specialised skills of the
business process are vested.
Key areas in risk management
Credit risk can be defined as the possibility of a loss due to
the inability of counterparties or borrowers to meet their
repayment obligations. Credit exposure is measured in terms of
both current and potential exposure. It is generally
represented by the principal value of on-balance-sheet
financial instruments, such as the development loans,
investments and other assets, and off-balance-sheet direct
credit substitutes such as guarantees. Credit risk exposure is
measured by internal client credit rating, adjusted by the
risk weighting of security held in support of loan debt.
Credit risk
Credit risk is actively managed at the individual project
transaction and counterparty levels, using a variety of
qualitative and quantitative measures. It is managed from
initial credit approval through to repayment of the credit.
Initially, a full borrower appraisal and credit rating is
conducted, complemented by project appraisal and, where
applicable, country risk assessment. Monitoring during
implementation and surveillance during the loan repayment
period is maintained through client contact, credit rating
review and loan loss provisioning. Management of this risk is
reflected in the quality of the loan book.
Market risk
Market risk can be defined as the possibility of a loss due to
changes in market prices and rates, and the correlations among
them. The market risk to which the banks are exposed includes:
· Interest rate risk: This is the spread between the cost of
borrowing and the return on the loan portfolio. The Bank’s
lending rate is based on a cost pass-through formula, which
traditionally helps limit the interest rate sensitivity of the
spread earnings on the Bank’s loan portfolio. In addition, the
Bank’s borrowings have been funded largely with medium- to
long-term borrowings, which provide a reasonably stable
interest rate basis. The Bank also uses interest rate swaps to
closely align the rate sensitivity characteristics of the loan
portfolio with that of the underlying funding. Interest rate
risk also arises from the different repricing of assets,
liabilities and contractual maturities. As part of the asset
and liability management process, the Bank is implementing the
asset and liability management (ALMAN) system to manage the
mismatch between assets and liabilities. The interest rate
risk of the Bank’s liquidity policy is limited to particular
markets, instruments and duration.
· Exchange rate risk: The Bank matches its borrowing
obligation in any currency with assets in the same currency.
In addition, it only enters in forward exchange contracts and
cross-currency swap agreements with reputable counterparties
rated A2 or better by international credit rating agencies.
Liquidity risk
Liquidity risk is the ability of the bank to meet its
financial obligations as they fall due, and manage the
mismatch in the maturing of assets and liabilities. The Bank
uses a wide maturity spectrum to fund its borrowings.
Liquidity holdings are held mainly in government securities,
call and term deposits.
Operational risk
Insurable asset and liability risks are insured and annually
reviewed. Systems and procedures are continuously reviewed and
appraised. Procurement policy has been overhauled and
anti-fraud and corruption measures adopted, supported by a
hotline facility to encourage staff to expose any abuse.
Course outline
* Role of risk management in commercial banks
* Risk management structure in banks
* Different types of risks which banks are exposed with
* How to define and different types of risks
* How to measure different type of risks
* Monitoring risk in commercial banks
* Role of efficient reporting
* Banks' Hedging policy
* Relevant policy statements
* Basel II Norms
* Risk Categorization
* Impact on the overall lending process
* Seminar outlining the Basel II data infrastructure and
regulatory reporting requirements facing financial
institutions.
* view on the road to reporting compliance
* Basel II impact on enterprise technology.
* Provide valuable insight for peer institutions dealing with
regulatory capital calculations and reporting.
* The impact of Basel II on private equity investments, or on
lower grade/longer term credit exposures, by banking
organizations.
* Other Legal and Compliance Issues Relating to Operational
and Reputational Risk: Capital Markets Perspective
* Impact on Borrowing
* Different approaches in credit risk
* Different approaches in operational risk
* Different methods of market risk
* Conclusions on the Basel II recommendations
Course Fees
VAT to be included at the local rate, if applicable. Costs
shown are per delegate inclusive of refreshments, lunches and
seminar materials. Cost of accommodation is not included.
GBP 2500
Certificates of Participation
Certificates of participation are remitted to course
participants upon request. |
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