Internal Capital Planning - Risk Governance, Capital Policy and Capital Preservation

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Trends in Risk Management and Capital Planning

  • The Evolution of Risk Management - from Duration to ERM
  • The Changing Assumptions about Risk Management
  • Capital Regulation from Basel I to Basel III and Beyond
  • The Need for more Efficient Capital Assessment and Allocation
  • Economic Capital - a "Common Currency" for Risk

Establishing a Formalized Capital Planning Process

  • Centralized vs. Decentralized Approaches to Capital Planning
  • An ERM Framework for Risk Management and Capital Planning
  • Establishing a Philosophy Regarding Risk Management
  • Establishing the Entity's Risk Culture and Risk Appetite
  • Establishing Capital Targets
  • Managing Business Lines in Relation to Capital Targets
  • Governance of the Capital Planning Process
  • Case Study

12.00 - 13.00 Lunch

13.00 - 16.30 Capital Policy and Risk Capture

  • Requirements for a Sound Capital Policy
  • Establishing Strategies to Address Capital Shortfalls
  • Capital- and Performance-Related Metrics
    • Regulatory and economic capital
    • ROE, RORAC and RAROC
  • Identifying and Quantifying Material Risks and Assessing Capital Needs
  • Establishing Clear Links between Capital and Liquidity Monitoring
  • Internal Capital Allocation and Performance Measurement
    • Making risk-return profiles comparable across business lines
    • Determining major sources of concentration and diversification
    • Deriving appropriate limits for all risks and business lines
  • Risk Pricing, Loan Pricing Measuring and Risk-Adjusted Performance
  • Case Study: Capital Policy, Risk Capture and Capital Allocation

Day Two

09.00 - 09.15 Brief recap

09.15 - 12.00 Using Stress Testing and Scenario Analyses in Capital Planning

  • The Need for a Forward-Looking View on Capital Sufficiency
  • Basel Principles for Sound Stress Testing Practices and Supervision
  • Types of Stress Tests
    • Single factor/sensitivity analysis
    • Reverse stress testing
    • Multi factor/scenario analysis
  • Types of Scenarios
    • Historical scenarios
    • Hypothetical scenarios
  • Stress Testing of Individual Risk Categories
  • Coherent (Integrated) Risk Stress Testing
    • Historical/hypothetical scenarios which are common for all risk types
    • Taking the correlation between risk types into account
    • Diversification effects and risk capital allocation
  • Integration in Risk Governance and Capital Planning
  • Case Study: Stress Testing and Scenario Analysis

12.00 - 13.00 Lunch

13.00 - 16.30 Capital Preservation

  • Prioritizing and Quantifying Capital Actions to Cushion against Unexpected Events
  • Capital Preservation Actions Available in Practice
    • Reduction in dividend payments
    • Raising fresh equity
    • Balance sheet reduction
    • Use of asset securitization to reduce RWA
    • Using credit derivatives and synthetic securitization to preserve capital
  • Assessing the Feasibility of Proposed Contingent Actions under Stress
  • Guiding Principles for Determining the Appropriateness of Particular Actions under Different Scenarios
  • Assessing Potential Benefits and Long-term Costs of Actions
  • Case Study: Capital Preservation

Evaluation and Termination of the Seminar

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