ACF Academy

Category: Asset & Liability Management

Strategic Bank Management and ALM

The Credit Crisis
 
The credit crisis, liquidity problems, securitisation, bad debts, the interbank market, bank capital, credit derivatives – all of these became headline news as banks worldwide experienced their worst crisis in 80 years.

Although the global economy is now showing some signs of recovery, the worst is not over for banks, many of which still face mounting write-offs from their lending portfolios, and future prospects that are far from certain for their customers, commerce, and regulation.

Never before has it been so important for bankers – at all levels – to understand the complexities of banking in the 21st century, to be aware of how their role fits in, to comprehend the big picture, and to identify problems before they become serious.

The Strategic Bank Management seminar does just that. Using ACF’s sophisticated Global Banker simulation – which now includes scenarios that allow delegates to experience at first hand the problems of mounting bad debts, the drying-up of the interbank markets, liquidity problems, and securitisations that go wrong – the seminar shows delegates how to develop effective solutions to today’s problems and strategies to avoid these issues in the future.
 
 
The Strategic Bank Management Seminar
 
Over an intensive three-day period, delegates will:
 
  Understand what went wrong for banks in 2008 – and learn how to avoid these issues in future.
  Identify and analyse a bank’s exposure to the various sources of risk – and how to design strategies to control risk within acceptable bounds.
  Appreciate the dynamics of commercial banking – exploring the interactions between  funding, lending, liquidity, and capital.
  Obtain a detailed overview of total bank operations – seeing clearly how everything fits together.
  Assess how derivatives like interest rate swaps and credit default swaps can enable banks to manage their exposure to interest rate and credit risk – but to be aware of counterparty and mark-to-market risk.
  Establish how to maximise risk-adjusted profits through the design and execution of successful strategies – taking into account the need for liquidity and the cost of capital.
  Explore how successful securitisation can help banks manage their balance sheet – but to be aware of the pitfalls when securitisations go wrong.
  Understand asset and liability management concepts – and how they affect day-to-day decisions throughout the bank.
  Appreciate the impact of Basel II on commercial bank operations.
  Discuss some of the changes to bank regulation that are likely to arise in the near future.
  Broaden the breadth and depth of their banking knowledge – learning about and gaining first-hand experience within each major area of the bank.
 
Hot Topic  The importance of credit risk, liquidity, and capital in today’s environment.
 
After taking part and experiencing the issues at first hand with Global Banker, delegates will gain a remarkable understanding of each of the principal functional areas within a bank, and see clearly how these areas successfully integrate together.

Delegates will learn to recognise the wider impact of their actions, and will be able to apply more astute judgement in the execution of their decisions. Instead of a blinkered outlook, delegates will have a panoramic view. Instead of copying the competition, delegates will devise creative strategies. Instead of reacting to problems, delegates will identify potential obstacles and implement pro-active tactics to circumvent them. In short, delegates will be able to make better, more profitable, but safe decisions, to the material advantage of the bank.

In an ever more complex and risky world, the Strategic Bank Management Seminar will help delegates achieve the critical edge.

 


 
Course Outline
   
 Overview of Bank Financial Management
   
Balance sheet structures
On- and off-balance sheet accounts
Interest rate risk measures
Securitisation
Regulatory ratios
Capital adequacy
Liquidity
ALM concepts
Integrating total bank operations – credit, finance, trading, treasury and risk management
Hot Topic:
The importance of credit risk, liquidity, and capital in today’s environment.
   
 Risk Management
   
Identifying banking risks
Credit risk
  • Exposure from traditional lending
  • Exposure through credit derivatives like CDS and CDO
Liquidity risk
  • Analysing the need for liquidity
  • Providing liquidity – asset-based and liability-based alternatives
Interest-rate risk
  • Maturity mismatch
  • Gap risk
  • Yield-curve risk
Currency risk
Duration risk
Operational risk
Quantifying risk exposures
Controlling risk through pro-active risk management
Hedging techniques using derivatives
Integrating and combining risks
The Value-at-Risk (VaR) approach
Topical issues:
 
 • Measuring risk under crisis conditions
  • Combining credit risk and market risk
Hot Topic:
Measuring risk in a stressed environment – beyond the VaR approach.
   
 Profitability
   
Measuring profitability: RoA vs. RoE
Risk-adjusted returns
Capital-adjusted returns
Risk-return trade-off
Impact of capital and liquidity requirements on bank profitability
Cost of implementing hedging programs
Hot Topic:
Returning to profitability.
   
 Lending Policy
   
Credit risk and its impact
Risk assessment
Establishing acceptable levels of risk-adjusted return
Using credit derivatives to manage credit risk exposure
Achieving the right lending mix
Retail vs. corporate
Syndicated loans
Floating-rate vs. fixed-rate
Pricing
Marketing
Hot Topic:
The importance of credit risk management in today’s environment.
   
 
   
 Financing Policy
   
Retail vs. money-market funding
Over-dependence on the money-markets – the problem
Liquidity risk from market funding
Competing for retail deposits
Marketing
Minimising costs of money market funding
Timing
Liquidity
Hot Topic:
Retail vs. money-market funding today.
   
 Treasury Management
 
Using money-market instruments – bills, CDs, commercial paper and bonds
Using derivative instruments – futures, options, FRAs and swaps
Controlling risk
Managing cash flows and liquidity
Investment management
Hot Topic:
Investing in liquid assets when Treasury rates are zero.
 
 Capital Management
 
Raising capital
Debt vs. equity vs. hybrid instruments
Floating-rate vs. fixed-rate debt
Callable bonds
Convertibles, equities
Measuring the cost of capital
RAROC
Capital allocation
Securitisation of assets
Hot Topic:
Raising capital when capital is in short supply.
 
 Capital for Credit, Market, and Operational Risk – Basel I and Basel II
 
Basel I
Tier One, Tier Two, and RWA
Basel II
Pillars I, II, and III
Menu of approaches
Standardised vs. Internal Ratings Based (IRB) approaches
Foundation vs. Advanced IRB approaches
Using internal credit models
Allowance for credit risk mitigation
Use of credit derivatives
Collateralisation
The Market Risk Amendment
Using internal market risk models
The multiplier: yellow and red cards
The Basel accord for operational risk
Hot Topic:
Is Basel II capital enough?
   

 
 
Accreditation


 

"Very interesting material – excellent instructor."

– Jason S.