This course surveys developments in the area of prudential risk regulation with particular emphasis on stress testing as the primary tool of regulation. The practical aspects of conducting CCAR/DFAST tests in the US are covered. The impact of the financial (subprime) crisis of 2007/8 on regulatory reform and the consequences for financial intermediaries are also reviewed.
CPE Credits: 7
This course is a component of the Risk Management Professional Certificate.
- Basic MS Excel skills
- Basic probability and statistics
- Basic knowledge of financial securities and markets
Module 1: Risk Regulation
- Why regulation?
- Systemic Risk
- A brief history of regulation
- Impact of the subprime crisis on regulation
Module 2: The Bank Capital Debate
- What is capital?
- Regulatory capital
- Economic capital
- Risk capital: The Merton-Perold approach
- Bankers vs. academics: The role of incentives
Module 3: The Basel Capital Accords
- Basel I
- 1988 BIS Accord
- Cooke ratio
- 1996 Amendment
- Basel II and Solvency II
- Three pillars of Basel II
- Credit risk capital under Basel II
- Basel 2.5, Basel III and Dodd-Frank
Module 4: Overview of Regulatory Regimes
- US Federal and State regulators
- Financial regulation in the United Kingdom, European Union and Asia
- Regulation in emerging economies