Interest rate risk in the banking book (IRRBB) is part of the Basel capital framework under Pillar 2 and principles for the management and supervision of interest rate risk were set out in 2004 by the BCBS. Following consultation during 2015, BCBS published revised principles (D368) in April 2016, to reflect changes in market and supervisory practices.
This course provides a comprehensive overview of the current regulations in place including BCBS documents, supervisory statements, and legislative revisions primarily for Europe.
These requirements will be compared with industry practice and also other regulatory initiatives, e.g. FRTB.
The course has three main objectives:
- To provide a comprehensive overview of the new standards presented in BCBS papers, look at the implementation in Europe, particularly in connection with CRD, CRR and EBA guidelines and technical standards.
- Refresh and develop quantitative techniques:
- Cash flow discounting, zero curve construction, yield curve models
- Computation of risk metrics, particularly: EVE, NII, LCR and NSFR.
- A look at some modelling techniques: stochastic simulation, pricing options, modelling behavioural options, non performing loans, basis risk, credit spreads, capital and liquidity buffer calibration, stress testing.
- Conditional probability theory in relation to stress scenarios
- Review and discuss risk management techniques covering, for example, topics such as: hedging, funds transfer pricing, FRTB and interactions between the banking book and the trading book.
Since stress testing has become an important tool for risk management and a key part of the regulatory framework the course also spends time discussing the application of stress testing techniques. A particular area of focus will be on approaches to assigning probabilities to stress scenarios in order to deliver a coherent stress-testing framework.
Participants will engage in Spreadsheet-based exercises and also role-playing exercises where time constraints and class sizes permit. Role-playing exercises will be used to practice engagement with a regulator, defending assumptions and responding to likely regulatory challenge.
Those with less quantitative backgrounds should not be discouraged by the mathematical content. Spread sheet examples will be provided with all data and formulae that will allow all participants to engage in what-if scenarios to gain a feel for how different assumptions can affect the results in regulatory reports and the likely challenges. Participants will be invited to work in groups to prepare a report based on their own assumptions and a role-playing session will be used to give participants experience of a meeting with regulators to review their submissions.
Doporučujeme účastníkům přinést si vlastní notebook vybavený MS Excelem, aby mohli samostatně provádět praktická cvičení a tím maximalizovali užitek z tohoto semináře.