Risk Management for Financial Institutions

Today, more than ever, business executives find themselves grappling with complex financial issues in addition to operational issues. The ability to manage asset and liability risk factors is becoming a key competency in the banking industry that requires more robust and comprehensive evaluation and predictability processes.

This course is designed to quickly provide senior executives with the analytical skills required to enhance the performance of their institution and derive more predictable outcomes for the balance sheet. Participants will learn how to analyze balance sheet information to influence actions to control risk and improve financial performance.

The course begins with an overview of the current economic environment, transitions into analysis of portfolio risk modeling, and concludes with strategies for managing risk. Teaching methods employed include group discussions of financial issues currently in the news, short examples, and detailed case problems for analysis and decision making.

No sessions currently available. Contact client services to get the next available date.
CPE CREDITS
14.0
Corporate portfolio risk managers, commercial bankers, analysts and associates, credit officers, retail and wholesale deposit product managers, ALCO Committee Members and IT staff.
No advance preparation required.
Students will be able to:
  • Analyze a bank's balance sheet to identify areas for evaluation and oversight that influence performance
  • Utilize the CAMEL analytical approach, as well as predictive modeling systems and processes
  • Identify warning signs of potential problems in asset and liability management
  • Appreciate the key risk management actions for balance sheet future performance
  • Gain insight into how banks manage credit risk, portfolio risk and funding risk
  • Appreciate the implications of capital adequacy requirements in a rapidly changing economic environment
None.
Day One
Macro Market Overview
  • Demystifying the risk management role
  • Economic environmental scan
  • What models of credit and collateral risk work and when?
  • Are there adequate economic scenario predictability models?
  • Loan, securities and deposit product risk evaluation

Evaluating a Bank's Portfolio Risk Profile

  • CAMEL analytical method
  • Measures of financial risk
  • Understanding a bank's earnings and profitability
  • Evaluating securities portfolios and building predictability models
  • Understanding the relationship between funding costs, duration expectations and external resources

Risk Management in a Rapidly Changing Economic Environment

  • ALCO risk (asset and liability management)
  • Analytical tools and processes for risk management
  • What are early warning signs of portfolio, funding and loan deterioration?
  • Derivatives, swaps and hedges for investments, loans and deposits
  • Basel capital models applications
  • Tier 1 and total capital implications
  • Calculating and predicting risk-based asset performance

Objectives of Financial Institutions Risk Analysis

  • Bank regulation and due diligence
  • Credit risks in commercial, consumer and investment portfolios
  • Liquidity risks
  • Interest rate risk
  • Financial leverage and liquidity

Day Two
Structural Risk and Advanced Risk Management Indices
  • Review of bank risk profile
  • Key regulatory issues related to capital adequacy and internal risk management
  • Due diligence portfolio evaluation application for M&A actions
Exercise

Analyzing ALCO Management

  • ALCO management and oversight responsibilities
  • Assessing ALCO management competency
  • Assessing model predictability and application to bank balance sheet focus
Exercise

Analyzing the Impact of Risk Management on Bank Performance

  • Balance sheet factors that influence bank earnings
  • Investment strategies that enhance performance
  • Analysis of overall profitability
  • Ratio analysis and measures of overall profitability and earnings
  • Evaluating changes in earnings and profitability
Exercise

Analyzing Asset and Liability Structure

  • Loan and deposit product positions
  • Risk of new offerings in the consumer space (credit cards)
  • Consumer auto (indirect and direct)
  • Commercial and commercial real estate
  • Direct and syndicated credits
  • Funding, yield maintenance and prepayment fees
  • Evaluating pricing scenarios that avoid asymmetric outcomes
  • Evaluating
  • Aging portfolio risk
  • Adverse selection and impact
  • Modeling bank balance sheet performance
  • Stress tests
Exercise

Analyzing Liability Positions

  • Core deposit gathering methods
  • Liability management, pricing and durations
  • Investment securities as a method to control liquidity and enhance returns
  • Central bank lines as a liability strategy
Exercise

Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.)

Lunch is included for all students taking day classes.