Bank Treasury Risk Management
This course offers comprehensive coverage of the key risk areas for a bank’s Treasury and how the various risks are managed, from both a practical and a regulatory perspective.
It focuses on Liquidity, Market and Operational Risk, since Credit risk management is normally a separate role but this can be incorporated.
All case studies can be based on the client.
It is presumed delegates have a reasonable understanding of fixed income and derivatives.
- The Risk Management process: Identify, Quantify, etc.
- A retail and commercial bank’s business model and the main risks that entail
- The Treasury’s core roles and responsibilities
- Exercise: a bank’s business model, its main risks and the Treasury’s roles
- Defining solvency
- The different sources of liquidity and their drawbacks
- The different methods of quantifying Liquidity risk:
- Loans to Deposit ratio
- Gap analysis
- Liquidity risk regulation – Basel:
- The Liquidity Coverage Ratio (LCR), what counts as High Quality Liquid Assets
- The Net Stable Funding Ratio (NSFR)
- Monitoring tools:
- Contractual Maturity Mismatch
- Concentration of Funding
- Available Unencumbered Assets
- LCR by significant currency
- Market-related monitoring tools
- Credit ratings
- The problems of excess liquidity and FX
- Exercise: Identifying the main sources of liquidity and their drawbacks
- Exercise: Calculating Loans to Deposits ratios
- Exercise: Gap analysis
- Exercise: Calculating the LCR
- Exercise: Calculating the NSFR
- What is Market risk and how does it arise?
- Counterparty risk and how it arises, how it varies between different instruments
- Spot FX , Herststatt risk and CLS Bank
- Basis risk – the frictions between related markets including fixing risk
- Quantifying Interest rate risk
- Quantifying Interest rate risk: Basel
- Quantifying Market risk: the different types of VaR and their limitations, Regulatory VaR
- Credit Support Annexes (CSAs) and margining
- Dealing with limit excesses
- Robust ad-hoc procedures
- Sovereign risk
- Exercise: Identifying sources of Market risk
- The scope of Operational risk
- How are portfolios valued?
- Valuation of different instruments
- Independent verification of market data
- The control function
- Confirmation of transactions
- Yield curve construction
- Profit analysis: where is the profit coming from and how?
- Profit v VaR and capital
- How are budgets set, what are the consequences for outcome v budget
- Basel and Operational risk – the different approaches
- Exercise: Deciphering a position limit report. Participants will be provided with a market risk limit report and asked to uncover all the market risks being run, and to suggest a suitable limit risk structure.
- Exercise: Analysing a real-life valuation fraud
- The official v unofficial culture and the pressure to perform
- Management structure
- The dangers of group-think