Asset & Liability Management

4 days 2-5 May 2017, New York United States $4,845.00 Download brochure Add to basket
4 days 3-6 Jul 2017, London UK £4,295.00 + VAT* Download brochure Add to basket
4 days 24-27 Jul 2017, Hong Kong Hong Kong $5,650.00 Download brochure Add to basket
4 days 17-20 Sep 2017, Dubai UAE £3,995.00 Download brochure Add to basket
4 days 16-19 Oct 2017, New York United States $4,845.00 Download brochure Add to basket
4 days 27-30 Nov 2017, Istanbul Turkey £3,410.00 Download brochure Add to basket

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Overview

This course will explore its issues and its challenges for bank risk managers auditors and regulators. The course will emphasise practical advantages and disadvantages of risk measurement and management tools and techniques. Samples of best practices risk reports will be provided.
Course knowledge will be reinforced through workshops using MS Excel to explore rate risk measurement and liquidity stress testing as well as course reviews. Basic knowledge in risk management, control and statistics is required. Active participation of the class is necessary to benefit from the full value of this programme.
The case studies will give you real life examples of the theories covered in the lectures, giving you a greater understanding of the course topics. The same sample bank is used for most risk measurement, reporting and hedging examples to enhance examples and comparisons.
All delegates will receive comprehensive course documentation for use before and during the programme. This will enable you to return to your organisation with an extensive and valuable source of information for future reference.

A 4-day course covering:

  • Using EaR and EvE to measure IRR
  • Measuring liquidity cash flow coverage and survival horizons
  • Managing interest rate risk
  • Managing liquidity risk
  • Best practice risk reporting
  • Contingency planning
  • Meeting requirements for regulatory compliance

The course is designed to combine theory and global best practice.

Teaching methodology

  • The course is designed to provide a mix of concepts with practical applications
  • Course material and organisation begin with fundamentals and proceed to advanced concepts
  • Heavy emphasis on data and algorithm limits on quantitative modeling
  • Hands on exercises for 4 methods of measuring rate risk plus liquidity stress testing
  • Case studies based on real-world examples

Who should attend?

  • Group Treasurers
  • Chief Risk Officers
  • Accounting and Finance Managers
  • Asset Managers
  • Liquidity Managers
  • Risk Managers and Risk Controllers
  • Risk Officers
  • Auditors and Bank Regulators

Who should attend

 

  • Group Treasurers
  • Chief Risk Officers
  • Accounting and Finance Managers
  • Asset Managers
  • Liquidity Managers
  • Risk Managers and Risk Controllers
  • Risk Officers
  • Auditors and Bank Regulators

Instructors

We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

Dubai
Graham Dudlyke

Graham Dudlyke is a leading consultant and specialist trainer with over three decades of experience within the international financial markets, holding senior positions in a number of leading financial institutions in both London and New York.

His career boasts a wealth of experience within the derivative and capital markets, with senior roles at JP Morgan chase and Mitsubishi UFJ Securities International within derivatives trading, marketing, structuring and risk management. At JP Morgan he managed rate option trading books, and additionally held responsibility for developing the derivatives trading and marketing presence within European markets. At Mitsubishi UFJ he held responsibility for the management of interest rate derivatives trading, and played a major role in building and developing the interest rate derivatives trading business into new products and markets.

In 2011 Graham joined Hilltop Fund Management LLP, London, as a consultant, advising on hedge fund trading and complex investment strategies.

As an independent training consultant for over 10 years, Graham brings his unique practitioner’s perspective and insight to financial markets, providing training and consultancy services to many of the world’s leading financial institutions - banks, institutional investors and asset managers, official institutions and other related financial bodies. The world’s largest asset manager, global ‘bulge bracket’ investment banks, a number of supranational development banks, Fortune 500 companies, as well as central banks across four continents are all represented amongst the institutions that Graham has worked with in the delivery of specialised training and consultancy needs.

Graham is a consultant to Euromoney Institutional Investor plc, international business-to-business publisher, business conference, seminar and training course provider, as a regular and world renowned expert on derivatives and capital markets.

Graham holds an M.B.A. from Imperial College, London and an M.A. from Oxford University.

Hong Kong
Thierry Fuller

The Course Director is a highly experienced trainer and consultant in market risk management.  Since 1997 he has worked as a consultant and trainer with the Top Three Investment Banks in the World (Goldman Sachs, Morgan Stanley, BofA Merrill Lynch), most of the largest 20 Banks in the World (Citi,  J.P. Morgan Chase, Stanchart, BBVA, ABN AMRO , Commerzbank etc...) , all Top 4 Audit/Tax Accounting Firms, commodity trading company and other prestigious financial institutions.  Recently, he has worked with Central Banks (such as Bank Indonesia) in the area of trading room risk management, regulation, supervision and Basel 2/3 implementation and with emerging market banks in Mexico, Brazil, Hong Kong, Malaysia, Singapore, Indonesia and Thailand in corporate transformation and risk management. 
The Course Director’s banking experience includes developing and managing the Capital Markets and Derivatives businesses for Wachovia Banks, America’s fourth largest bank at the time. He also led the development of the risk management operations and infrastructure for the trading room. His banking experience also includes working in corporate finance/investment banking, especially concerning M&A for financial institutions, and asset management at Brown Brother Harriman in New York.

The Course Director has also worked as a management consultant at McKinsey & Company in strategic consulting and organizational changes for banks.  He has also worked in the Corporate Finance/Treasury Consulting Practice at KPMG in New York where trading, risk management, auditing and compliance where high priority.

He was a Joseph Lauder Fellow at the Wharton School where he received his MBA.  He also graduated with an MA in International Studies and an MA in Political Science from the University of Pennsylvania. The Course Director completed his undergraduate studies at Columbia University.  


 

 

London
Graham Dudlyke

Graham Dudlyke is a leading consultant and specialist trainer with over three decades of experience within the international financial markets, holding senior positions in a number of leading financial institutions in both London and New York.

His career boasts a wealth of experience within the derivative and capital markets, with senior roles at JP Morgan chase and Mitsubishi UFJ Securities International within derivatives trading, marketing, structuring and risk management. At JP Morgan he managed rate option trading books, and additionally held responsibility for developing the derivatives trading and marketing presence within European markets. At Mitsubishi UFJ he held responsibility for the management of interest rate derivatives trading, and played a major role in building and developing the interest rate derivatives trading business into new products and markets.

In 2011 Graham joined Hilltop Fund Management LLP, London, as a consultant, advising on hedge fund trading and complex investment strategies.

As an independent training consultant for over 10 years, Graham brings his unique practitioner’s perspective and insight to financial markets, providing training and consultancy services to many of the world’s leading financial institutions - banks, institutional investors and asset managers, official institutions and other related financial bodies. The world’s largest asset manager, global ‘bulge bracket’ investment banks, a number of supranational development banks, Fortune 500 companies, as well as central banks across four continents are all represented amongst the institutions that Graham has worked with in the delivery of specialised training and consultancy needs.

Graham is a consultant to Euromoney Institutional Investor plc, international business-to-business publisher, business conference, seminar and training course provider, as a regular and world renowned expert on derivatives and capital markets.

Graham holds an M.B.A. from Imperial College, London and an M.A. from Oxford University.

Istanbul
Graham Dudlyke

Graham Dudlyke is a leading consultant and specialist trainer with over three decades of experience within the international financial markets, holding senior positions in a number of leading financial institutions in both London and New York.

His career boasts a wealth of experience within the derivative and capital markets, with senior roles at JP Morgan chase and Mitsubishi UFJ Securities International within derivatives trading, marketing, structuring and risk management. At JP Morgan he managed rate option trading books, and additionally held responsibility for developing the derivatives trading and marketing presence within European markets. At Mitsubishi UFJ he held responsibility for the management of interest rate derivatives trading, and played a major role in building and developing the interest rate derivatives trading business into new products and markets.

In 2011 Graham joined Hilltop Fund Management LLP, London, as a consultant, advising on hedge fund trading and complex investment strategies.

As an independent training consultant for over 10 years, Graham brings his unique practitioner’s perspective and insight to financial markets, providing training and consultancy services to many of the world’s leading financial institutions - banks, institutional investors and asset managers, official institutions and other related financial bodies. The world’s largest asset manager, global ‘bulge bracket’ investment banks, a number of supranational development banks, Fortune 500 companies, as well as central banks across four continents are all represented amongst the institutions that Graham has worked with in the delivery of specialised training and consultancy needs.

Graham is a consultant to Euromoney Institutional Investor plc, international business-to-business publisher, business conference, seminar and training course provider, as a regular and world renowned expert on derivatives and capital markets.

Graham holds an M.B.A. from Imperial College, London and an M.A. from Oxford University.

New York
Graham Dudlyke

Graham Dudlyke is a leading consultant and specialist trainer with over three decades of experience within the international financial markets, holding senior positions in a number of leading financial institutions in both London and New York.

His career boasts a wealth of experience within the derivative and capital markets, with senior roles at JP Morgan chase and Mitsubishi UFJ Securities International within derivatives trading, marketing, structuring and risk management. At JP Morgan he managed rate option trading books, and additionally held responsibility for developing the derivatives trading and marketing presence within European markets. At Mitsubishi UFJ he held responsibility for the management of interest rate derivatives trading, and played a major role in building and developing the interest rate derivatives trading business into new products and markets.

In 2011 Graham joined Hilltop Fund Management LLP, London, as a consultant, advising on hedge fund trading and complex investment strategies.

As an independent training consultant for over 10 years, Graham brings his unique practitioner’s perspective and insight to financial markets, providing training and consultancy services to many of the world’s leading financial institutions - banks, institutional investors and asset managers, official institutions and other related financial bodies. The world’s largest asset manager, global ‘bulge bracket’ investment banks, a number of supranational development banks, Fortune 500 companies, as well as central banks across four continents are all represented amongst the institutions that Graham has worked with in the delivery of specialised training and consultancy needs.

Graham is a consultant to Euromoney Institutional Investor plc, international business-to-business publisher, business conference, seminar and training course provider, as a regular and world renowned expert on derivatives and capital markets.

Graham holds an M.B.A. from Imperial College, London and an M.A. from Oxford University.

Venue

New York

New York Hotel

This program takes place on a non-residential basis at a New York hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

As with all programmes on-site administrators are with you throughout the programme to ensure smooth administration and group interaction.

London

Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

Hong Kong

4-5 Star Hotel in Hong Kong

All of our courses are held in 4 – 5 star hotels, chosen for their location, facilities and level of service. You can be assured of a comfortable, convenient learning environment throughout the duration of the course.

Due to the variation in delegate numbers, we will send confirmation of the venue to you approximately 2 weeks before the start of the course. Course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

Dubai

Dubai Finance

This programme takes place on a non-residential basis at a central 4 to 5* Dubai hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

Istanbul

Istanbul Hotel

This programme takes place on a non-residential basis in a central Istanbul Hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation.

 


 

Related Courses

Inhouse


 

Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:





Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.



We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:


Read more about our offering or complete a call back request to speak to a learning specialist.

 

Agenda

Agendas are localised, please select your preferred location.


 

DAY 1


INTEREST RATE RISK ON THE BANKING BOOK


ALM and Risk Overview

  • Risk and volatility
  • Financial institution risks

 Measuring Interest Rate Risk

  • Components of Interest Rate Risk
  • Critical tasks and risk elements
  • Balance sheet products, positions and options
  • Gap Analysis

                - Concepts and variations
                - Advantages and disadvantages

  • Earnings at Risk (EaR)

                - Concepts and variations
                - Advantages and disadvantages

  • Duration and Duration of Equity (DoE)

                - Concepts and variations
                - Using key rate duration
                - Understanding convexity
                - Advantages and disadvantages
                - Duration of Equity (DoE)

  • Economic Value of Equity (EvE)

               - Concepts and variations
               - Advantages and disadvantages

  • Value at Risk (VaR)

               - Concepts and variations
               - Appropriateness for IRR measurement

 Interest Rate Risk Stress Testing

  • Deterministic versus stochastic rate scenarios

              - Deterministic sources: estimates, forecasts or statistical analysis
              - Parallel and twist scenarios
              - Probable and improbable rate changes
              - Rate changes, yield curve smoothing and term structure models

 Deposit, Loan and Other Assumptions for IRR Modeling

  • Indeterminate maturity deposits

             - Decay analysis,
             - Replicating portfolio analysis
             - Econometric/reduced form models
             - Other techniques

  • Pre-payable loans

             - Understanding path dependent options
             - Adjusting option exercise for transaction costs
             - Multi-factor models
             - Other rate sensitive cash flows 

Measuring Interest Rate Risk Summary

  • Duration and EvE comparison
  • Gap, Duration, EaR and EvE comparisons
  • Model methodology grade card
  • EaR, EvE, the direction and timing of IRR exposures
  • Best practice measurement recommendations

IRR Group Exercises

  • Calculating Gap
  • Calculating Earnings at Risk
  • Calculating Duration of Equity
  • Calculating Economic Value of Equity

Each attendee must have a laptop or equivalent computer with software such as MS Excel ®that does present value calculations.

Review

DAY 2


LIQUIDITY RISK ON THE BANKING BOOK


 Measuring and Monitoring Liquidity Risk

  • Liquidity risk overview and critical tasks
  • Components and characteristics
  • Liquidity ratios and traditional metrics
  • Cash flow forecasts
  • Best practice liquidity risk measurement

 Liquidity Scenarios and Stress Levels

  • Scenario and stress testing: purposes and requirements
  • Stochastic Stress Tests: Liquidity VaR
  • Deterministic scenarios

                 - Idiosyncratic scenarios
                 - Systemic scenarios
                 - Combination scenarios and contagion
                 - How many scenarios?
                 - Describing scenarios

  • Defining and using severity or stress levels

                 - Degrees of severity
                 - Worst case stress vs plausible stress
                - How many stress levels?

  • Reverse stress tests
  • Scenario and stress test summary

 Liquidity Stress Testing

  • Understanding Stress Test Objectives
  • Step-by-step process review – Eight Steps
  • Liquidity Stress testing summary

Developing Deposit, Off Balance Sheet and Other Liquidity Stress Test Assumptions

  • Key elements, drivers and sources
  • Cash and “due from”/nostra
  • Cash flow from securities
  • Cash flows from loans
  • Cash flows from liabilities
  • A Three step process for estimating cash flows from deposits and non-deposit liabilities

                - Multi-factor scoring model
                - Rankings
                - Application of historical data

  • Secured and unsecured wholesale funding
  • Assumptions for loans from and to financial institutions
  • Estimating cash flows from off balance sheet commitments

                 - Methods for 8 categories of off balance sheet exposures

  • More thorny issues
  • BIS assumption guidelines
  • Consistency and Escalation

                  - Worksheets for documenting and managing assumptions

Liquidity Funding Crisis Case Studies

  • Northern Rock
  • IndyMac
  • Bear Stearns
  • BEA
  • Wachovia Bank
  • Dexia Bank

Review

DAY 3


ALM RISK MODELING, MANAGEMENT

Effective Risk Modeling

  • Choosing models
  • Data requirements
  • Data aggregation
  • Using models
  • Back testing your earnings forecast and components
  • Back testing EVE components
  • Model risk
  • Understanding model risk and the life cycle of models
  • Regulatory requirements for models and model validations

 Managing Interest Rate Risk

  • IRR management overview
  • Risk minimization versus risk positioning
  • Managing interest rate risk without derivatives
  • Managing interest rate risk with derivatives: Learn the role and overview of (OTC) derivatives in exposure management
  • Optimizing EaR and EVE
  • Differences between interest rate risk management tactics and strategies

               - Hedge accounting issues for macro and micro hedges

 Managing Liquidity Risk

  • Tactics and strategies
  • The connection between stress tests and balance sheet management

               - Managing time

  • Concentration / diversification overview
  • Liability diversification: The Good, The Bad and the Ugly

              - Diversification by number of sources
              - Diversification by type of source
              - Diversification by size
              - Volatile liability concentrations

  • Managing the stress testing process: what not to do
  • Managing intraday liquidity risk

 Key Risk Indicators, Liquidity Contingency Planning and Event Management

  • Overview and requirements for best practice contingency plans
  • Early Warning / Key Risk Indicators / Key Performance Indicators including over 30 internal and external indicators of balance sheet risk, credit risk, funding risk, concentrations and diversification.
  • Invocation and Escalation
  • Identifying and estimating secondary sources of funds
  • Linking stress tests to contingency planning
  • The event management committee
  • Confidence management
  • Internal and external communication
  • Plan testing

 Effective Risk Governance – Concepts and Structure

  • Risk appetite: top down methods, bottom up methods and synthesis
  • Risk Culture
  • Risk management organizational structure and the role of Treasury

              - Traditional treasury organization
              - CRO organization structure
              - Alternatives and examples
              - Centralized or decentralized
              - Consolidated or unconsolidated
              - Four mandatory views

  • Risk strategies
  • Risk limits

              - Risk limit overview
              - IRR limits
              - Liquidity risk limits
              - Level 1, level 2 and level 3 limits

 Effective Risk Governance – Practices and Tactics

  • Building a better ALCO
  • Best practice reports to improve the effectiveness of risk managment

              - Interest rate risk reports
              - Liquidity risk reports

  • Risk management oversight
  • Role of internal audit in risk management
  • Best practice policies

               - Contents of interest rate risk policy
               - Contents of liquidity risk policy

  • Governance summary

Review

DAY 4


ALM RISK GOVERNANCE, APPLICATION TO CAPITAL AND EARNINGS


 Basel III and Liquidity Regulation

  • Global regulations
  • Basel III Liquidity Coverage Ratio: requirements and problems
  • Basel III Net Stable Funding Ratio: requirements and problems
  • Basel III Other metrics
  • Basel III Summary

 Overview of FTP, LFTP and RAROC

  • Introduction to FTP
  • Interest rate risk FTP

               - Loans
               - Deposits

  • Pricing goals
  • Regulatory requirements for liquidity FTP
  • Conceptual requirements for liquidity FTP
  • LFTP for current, mismatch liquidity risk

              - Standard method
              - Problems, advantages and disadvantages

  • LFTP for contingent liquidity risk

                - Simple method
                - Alternative method
                - Other approaches

  • Combining the LFTP pieces
  • Best practice LFTP recommendations
  • Introduction to Risk Adjusted Return on Capital --- enhancing capital management and performance measurement

Testing Understanding

 Liquidity Stress Simulation

One computer with spreadsheet software such as as MS Excel ®will be required for every four attendees.


Course summary and close


 

DAY 1


INTEREST RATE RISK ON THE BANKING BOOK


ALM and Risk Overview

  • Risk and volatility
  • Financial institution risks

 Measuring Interest Rate Risk

  • Components of Interest Rate Risk
  • Critical tasks and risk elements
  • Balance sheet products, positions and options
  • Gap Analysis

                - Concepts and variations
                - Advantages and disadvantages

  • Earnings at Risk (EaR)

                - Concepts and variations
                - Advantages and disadvantages

  • Duration and Duration of Equity (DoE)

                - Concepts and variations
                - Using key rate duration
                - Understanding convexity
                - Advantages and disadvantages
                - Duration of Equity (DoE)

  • Economic Value of Equity (EvE)

               - Concepts and variations
               - Advantages and disadvantages

  • Value at Risk (VaR)

               - Concepts and variations
               - Appropriateness for IRR measurement

 Interest Rate Risk Stress Testing

  • Deterministic versus stochastic rate scenarios

              - Deterministic sources: estimates, forecasts or statistical analysis
              - Parallel and twist scenarios
              - Probable and improbable rate changes
              - Rate changes, yield curve smoothing and term structure models

 Deposit, Loan and Other Assumptions for IRR Modeling

  • Indeterminate maturity deposits

             - Decay analysis,
             - Replicating portfolio analysis
             - Econometric/reduced form models
             - Other techniques

  • Pre-payable loans

             - Understanding path dependent options
             - Adjusting option exercise for transaction costs
             - Multi-factor models
             - Other rate sensitive cash flows 

Measuring Interest Rate Risk Summary

  • Duration and EvE comparison
  • Gap, Duration, EaR and EvE comparisons
  • Model methodology grade card
  • EaR, EvE, the direction and timing of IRR exposures
  • Best practice measurement recommendations

IRR Group Exercises

  • Calculating Gap
  • Calculating Earnings at Risk
  • Calculating Duration of Equity
  • Calculating Economic Value of Equity

Each attendee must have a laptop or equivalent computer with software such as MS Excel ®that does present value calculations.

Review

DAY 2


LIQUIDITY RISK ON THE BANKING BOOK


 Measuring and Monitoring Liquidity Risk

  • Liquidity risk overview and critical tasks
  • Components and characteristics
  • Liquidity ratios and traditional metrics
  • Cash flow forecasts
  • Best practice liquidity risk measurement

 Liquidity Scenarios and Stress Levels

  • Scenario and stress testing: purposes and requirements
  • Stochastic Stress Tests: Liquidity VaR
  • Deterministic scenarios

                 - Idiosyncratic scenarios
                 - Systemic scenarios
                 - Combination scenarios and contagion
                 - How many scenarios?
                 - Describing scenarios

  • Defining and using severity or stress levels

                 - Degrees of severity
                 - Worst case stress vs plausible stress
                - How many stress levels?

  • Reverse stress tests
  • Scenario and stress test summary

 Liquidity Stress Testing

  • Understanding Stress Test Objectives
  • Step-by-step process review – Eight Steps
  • Liquidity Stress testing summary

Developing Deposit, Off Balance Sheet and Other Liquidity Stress Test Assumptions

  • Key elements, drivers and sources
  • Cash and “due from”/nostra
  • Cash flow from securities
  • Cash flows from loans
  • Cash flows from liabilities
  • A Three step process for estimating cash flows from deposits and non-deposit liabilities

                - Multi-factor scoring model
                - Rankings
                - Application of historical data

  • Secured and unsecured wholesale funding
  • Assumptions for loans from and to financial institutions
  • Estimating cash flows from off balance sheet commitments

                 - Methods for 8 categories of off balance sheet exposures

  • More thorny issues
  • BIS assumption guidelines
  • Consistency and Escalation

                  - Worksheets for documenting and managing assumptions

Liquidity Funding Crisis Case Studies

  • Northern Rock
  • IndyMac
  • Bear Stearns
  • BEA
  • Wachovia Bank
  • Dexia Bank

Review

DAY 3


ALM RISK MODELING, MANAGEMENT

Effective Risk Modeling

  • Choosing models
  • Data requirements
  • Data aggregation
  • Using models
  • Back testing your earnings forecast and components
  • Back testing EVE components
  • Model risk
  • Understanding model risk and the life cycle of models
  • Regulatory requirements for models and model validations

 Managing Interest Rate Risk

  • IRR management overview
  • Risk minimization versus risk positioning
  • Managing interest rate risk without derivatives
  • Managing interest rate risk with derivatives: Learn the role and overview of (OTC) derivatives in exposure management
  • Optimizing EaR and EVE
  • Differences between interest rate risk management tactics and strategies

               - Hedge accounting issues for macro and micro hedges

 Managing Liquidity Risk

  • Tactics and strategies
  • The connection between stress tests and balance sheet management

               - Managing time

  • Concentration / diversification overview
  • Liability diversification: The Good, The Bad and the Ugly

              - Diversification by number of sources
              - Diversification by type of source
              - Diversification by size
              - Volatile liability concentrations

  • Managing the stress testing process: what not to do
  • Managing intraday liquidity risk

 Key Risk Indicators, Liquidity Contingency Planning and Event Management

  • Overview and requirements for best practice contingency plans
  • Early Warning / Key Risk Indicators / Key Performance Indicators including over 30 internal and external indicators of balance sheet risk, credit risk, funding risk, concentrations and diversification.
  • Invocation and Escalation
  • Identifying and estimating secondary sources of funds
  • Linking stress tests to contingency planning
  • The event management committee
  • Confidence management
  • Internal and external communication
  • Plan testing

 Effective Risk Governance – Concepts and Structure

  • Risk appetite: top down methods, bottom up methods and synthesis
  • Risk Culture
  • Risk management organizational structure and the role of Treasury

              - Traditional treasury organization
              - CRO organization structure
              - Alternatives and examples
              - Centralized or decentralized
              - Consolidated or unconsolidated
              - Four mandatory views

  • Risk strategies
  • Risk limits

              - Risk limit overview
              - IRR limits
              - Liquidity risk limits
              - Level 1, level 2 and level 3 limits

 Effective Risk Governance – Practices and Tactics

  • Building a better ALCO
  • Best practice reports to improve the effectiveness of risk managment

              - Interest rate risk reports
              - Liquidity risk reports

  • Risk management oversight
  • Role of internal audit in risk management
  • Best practice policies

               - Contents of interest rate risk policy
               - Contents of liquidity risk policy

  • Governance summary

Review

DAY 4


ALM RISK GOVERNANCE, APPLICATION TO CAPITAL AND EARNINGS


 Basel III and Liquidity Regulation

  • Global regulations
  • Basel III Liquidity Coverage Ratio: requirements and problems
  • Basel III Net Stable Funding Ratio: requirements and problems
  • Basel III Other metrics
  • Basel III Summary

 Overview of FTP, LFTP and RAROC

  • Introduction to FTP
  • Interest rate risk FTP

               - Loans
               - Deposits

  • Pricing goals
  • Regulatory requirements for liquidity FTP
  • Conceptual requirements for liquidity FTP
  • LFTP for current, mismatch liquidity risk

              - Standard method
              - Problems, advantages and disadvantages

  • LFTP for contingent liquidity risk

                - Simple method
                - Alternative method
                - Other approaches

  • Combining the LFTP pieces
  • Best practice LFTP recommendations
  • Introduction to Risk Adjusted Return on Capital --- enhancing capital management and performance measurement

Testing Understanding

 Liquidity Stress Simulation

One computer with spreadsheet software such as as MS Excel ®will be required for every four attendees.


Course summary and close

Day 1

Introduction to ALM

  • Banking books vs. Trading books
  • Interest rate risk in treasury banking books
  • Liquidity risk
  • Funds transfer pricing (FTP)
  • The case for scale economies and skill centralisation
  • Identifying economic value added of customer banking businesses
  • Product and customer profitability controls

The treasury business remit

  • The treasury "banking books"
    • Net interest income generation (with/without customer margin)
  • Liquidity risk (internal lender of last resort) Repricing risk (interest rates, FX)
    • Gap analysis
  • Maturity mismatch risk and the dynamics of liquidity gaps
  • Short term (medium term and long term) funding and securing of contingent funding/liquidity sources
  • Modelling (replicating) customer assets and liabilities
    • "The model books"
  • The maturity mismatch and "riding the yield curves"
  • Regulatory compliance and rating safeguarding
  • Counterparty default and settlement risks

Management of a customer banking book

  • Hedging risks with "macroswaps"
  • Basis risks in banking books
  • Duration of fixed income equity

Case study: Hedging repricing risks with constant maturity swaps

Day 2

Modelling interest rate risk

  • Deterministic vs. Stochastic models
  • Equilibrium vs. “No arbitrage” models
  • Yield curve bootstrapping and interpolation
  • Scenario analysis

Treasury philosophies beyond liquidity providers of last resort

  • Profit centres: NII producers
  • Service centres: Margin stability providers

Case study: Repricing gaps vs. DV01/duration

Case study: Liquidity gaps

  • Managing asset liquidity

Cast study: Stress testing deposit "stickiness"

  • Accounting for treasury books: IFRS
  • MtM vs. "Available for sale" vs. "Held to maturity" books
  • Accrued vs. MtM Accounting Standards
    • Link to financial accounting for net interest income
  • Regulatory compliance - Liquidity
  • Replicating portfolios and margin stabilisation
  • Core assets/liabilities
  • Volatile assets/liabilities
  • Modelling volume elasticities - Best practices

Case study: Static replication of OTC products via exchange traded products

Day 3

Risk management in treasury operations

  • Market risks and VaR
  • Basel II, pillar 2 impacts
  • Credit and counterparty default risks
  • Operational risks
  • Funding liquidity risk
  • Cashflow profiles
  • Forecasting and modelling cashflows
  • Asset liquidity risk and liability liquidity risk
  • Best practices risk management standards
  • Modelling customer behaviour
    • Model risks
  • Stress testing in ALM books
  • Risk mitigation
    • Application of derivatives

Case studies: Bank liquidity crises

Day 4

Effective risk governance

Case study: Defining risk appetite

  • Establishing risk limits - Best practices
  • Risk management information systems (MIS)
  • Effective risk policies
    • Responsibilities 6 organisational consequences

Contingency planning for liquidity

  • Lessons learned from the financial crisis
  • The role of internal and external auditors

Integration of ALM within firm-wide risk management

  • Congruence with corporate strategy

Case discussion: Business unit steering through effective ALM

Group portfolio management and impact on ALM

Case study: Managing correlations

Day 1

Introduction to ALM

§ Defining ALM and its objectives
        
        -
Risk management (interest rate, liquidity risks)

        - Net interest income maximisation

        -
Enhancement of net worth (Economic Value Added)

§ Asset liability mismatches for Banks

       - Maturity transformation and the role of banks

       - Banking book and Trading book classifications

       - IFRS - Accrued vs. Fair Value (M-t-M) Accounting Treatment

       - Interest rate risk in banking books versus trading book exposures

       - Funds Transfer Pricing (FTP)

§ ALM for other financial institutions

       - Defined benefit Pension fund management

       - Insurance (Life, Property and Casualty)

       - Structural asset – liability mis-matches

       - Risk exposures (liquidity, interest rate, inflation, credit etc.)

The Role and Organisation of Treasury

§ Treasury and the implementation of ALM strategy

§ The roles and responsibilities of the treasury function

       - Funding and investment strategy

       - Liquidity risk management

       - Market risk management

§ Current trends – changes in the strategic role of treasury

       - Impact of regulatory capital requirements on treasury strategy

§ Objectives and organisation of the treasury function

       - Maximisation of shareholder value

       - Risk management policy, reporting and control

Treasury Risk Management

§ Risk Management within the treasury function

§ Market risks:

       - Interest rate risks (gap, yield curve, convexity)

       - Currency (FX) exposure

       - Credit spread and default risks

       - Commodity price risks

       - Optionality: Volatility and correlation risks

§ Sources and types of market risk exposure:

       - Cash flow and balance sheet (Transaction and Translation) exposures

§ Operational risks

Day 2

Modelling Interest Rate Risk

§ Interest rate risk in “Banking book” and” trading book” assets and liabilities

§ Interest rate risk; impact on NII and economic value

§ Sources of interest rate risk exposure in assets and liabilities

       - 
Price risk vs. re-pricing risk

       - Current rate sensitivity vs. NPV

       - Yield curve risk

       - Basis risk

       - Convexity and optionality risks

§ Measurement of interest rate risk

§ Interest rate Gap analysis

       - Gap management and hedging

       - Managing interest rate gap risk with interest rate derivatives

       - Shortcomings of gap analysis

§ Measurement of interest rate risk exposure:

       - Duration, DV01/PV01 measures

§ Duration/DV01 analysis of assets and liabilities

§ Portfolio Approach to management of interest rate risk

       - Bucketing interest rate risk into maturity bands

       - Weaknesses in bucketed duration approach

       - Key rate duration

       - Calculation of key rate duration

§ Asset liability portfolio management techniques

       - Immunisation

       - Cash flow matching, horizon matching and dedicated portfolio approaches

§ Statistical approaches to risk measurement – Value at Risk

Value at Risk

§ Drawbacks of traditional market risk measurement and management techniques

§ Introduction to statistical methods of risk measurement – Value at Risk

§ Calculating firm-wide VaR – parametric and simulation based techniques

§ Integration within firm-wide risk management strategy

       - VaR based allocation of capital and limit setting

       - Performance measurement (RAROC)

§ Advantages and shortcomings of different VaR methodologies

§ Back-testing and stress testing

§ Limitations of VaR and the need for complementary measures

§ Extending the statistical approach to credit risk:

§ Portfolio credit risk modelling

§ Portfolio loss distributions

§ Using portfolio credit models to optimise asset pricing/returns

§ Stochastic interest rate risk modelling

§ Yield curve modelling – bootstrapping swap/bond yield curves

§ Convexity risk; pre-payment risks in mortgages and other callable debt

§ Modelling pre-payment options

§ Stochastic rate models

       - Equilibrium and no-arbitrage models

       - Using stochastic models to value optionality, estimate interest risk (effective duration, Delta, Gamma measurements)

Case Study: Value at risk analysis of firm wide balance sheet

Day 3

Managing Interest Rate Risk - Interest Rate Derivatives

§ The role of derivatives in asset liability management

§ OTC and exchange traded derivatives

§ Interest Rate Forwards: Forward Rate Agreements (FRAs)

§ Short term Interest Rate Futures – Eurodollar/Euribor Futures

§ Basis risks in hedging

§ Overnight Index Swaps (OIS) and Interest Rate Swaps (IRS)

§ Constant maturity swaps (CMS)

§ Tailored swaps and ‘macro’ swaps

§ Accounting treatment – Hedge accounting

§ Interest rate options:

   - Caps/floors and swap options

Case Study: Identification and measurement of interest rate risk; Hedging strategies using FRAs/OIS and Interest Rate Swaps

Applications of CMS in hedging re-pricing risk, yield curve exposures

Liquidity Risk Measurement and Management

§ Funding and liquidity risk

§ Metrics for measuring funding and liquidity risk

§ Gap analysis:

       - Types of liquidity gap

       - Liquidity gap time profiles

       - The maturity mismatch and "riding the yield curves

§ Maturity mismatch risk and the dynamics of liquidity gaps

§ Cash flow forecasting

       - Short term (medium/long term) funding and securing of contingent funding/liquidity sources

       - Modelling (replicating) customer assets and liabilities; liquidity assessment

       - Time buckets and granularity

       - Liquidity risk using cash flow models

§ Effective liquidity risk management

       - Funding mix: Liquidity gap analysis and funding strategy

       - Liquidity buffers and reserves

       - Eligible collateral and central bank funding

       - Risk limits – settling limits

       - Contingencies and contingency planning

       - Funds transfer pricing

§ Scenario analysis

§ Defining scenarios

§ Case studies (1998, 2007 – 2008)

§ Lessons learned from systemic events

Day 4

Stress testing in ALM

§ Stress testing customer assets and liabilities

§ Indeterminate maturity deposits

§ Market access and eligible collateral

§ Traditional stress tests

§ Stochastic approaches to stress testing

§ Stress testing and VaR

§ Inappropriateness of VaR in liquidity risk management

§ Practical approaches to dealing with extreme events in stress testing

Case Study: Illustrative Examples of Stress Tests

Funds transfer pricing

§ Enabling the meaningful evaluation for profitability in banking products

§ FTP as a core component of asset liability management

§ Standard FTP methodologies

§ Modelling customer assets and liabilities: price elasticity

§ Constructing internal funding curves

§ Costing liquidity risk premia

The Role of Securitisation in ALM

§ Introduction to securitisation

§ Funding and balance sheet restructuring via securitisation

§ Necessary asset characteristics for securitisation

§ Asset backed security classes (MBS, ABS, CDOs etc.)

§ Strategic benefits of securitisation

§ The economic rationale

§ Regulatory capital considerations

§ Trading book capital rules (Basel 2.5)

§ Basel 3 capital requirements

§ How have the regulatory changes impacted on the Securitisation market?

Regulatory Compliance – Liquidity Requirements

§ Liquidity risk requirements (NSFR, LCR)

§ Designation of core versus volatile asset and liabilities

§ Stress scenarios

§ Impact of liquidity requirements for treasury balance sheet management and financing strategy

§ Liquidity asset buffer

§ Eligible asset types

§ Assessment of the impact of liquidity rules on bank profitability, risk and ALM strategy

 

Treasury Risk and Regulatory Capital Requirements

§ Regulatory capital requirements for financial institutions

§ An overview of the Basel Accord – objectives, structure and provisions:

       - Market risk

       - Counterparty risk

       - Operational risk

§ Banking book and trading book designations

§ Standardised and internal model approaches

§ Trading book capital rules (Basel 2.5)

§ Overview of Basel 3 regulatory capital requirements

§ Liquidity risk requirements (NSFR, LCR)

§ Impact of liquidity requirements for treasury balance sheet management and financing strategy

§ Liquidity asset buffer

§ Regulatory requirements for liquidity risk management

§ Basel 3 provisions

       - Net Stable Funding Ratio (NSFR)

       - Liquidity Coverage Ratio (LCR)

       - Liquidity asset buffer (asset types, characteristics, costs)


 

DAY 1


INTEREST RATE RISK ON THE BANKING BOOK


ALM and Risk Overview

  • Risk and volatility
  • Financial institution risks

 Measuring Interest Rate Risk

  • Components of Interest Rate Risk
  • Critical tasks and risk elements
  • Balance sheet products, positions and options
  • Gap Analysis

                - Concepts and variations
                - Advantages and disadvantages

  • Earnings at Risk (EaR)

                - Concepts and variations
                - Advantages and disadvantages

  • Duration and Duration of Equity (DoE)

                - Concepts and variations
                - Using key rate duration
                - Understanding convexity
                - Advantages and disadvantages
                - Duration of Equity (DoE)

  • Economic Value of Equity (EvE)

               - Concepts and variations
               - Advantages and disadvantages

  • Value at Risk (VaR)

               - Concepts and variations
               - Appropriateness for IRR measurement

 Interest Rate Risk Stress Testing

  • Deterministic versus stochastic rate scenarios

              - Deterministic sources: estimates, forecasts or statistical analysis
              - Parallel and twist scenarios
              - Probable and improbable rate changes
              - Rate changes, yield curve smoothing and term structure models

 Deposit, Loan and Other Assumptions for IRR Modeling

  • Indeterminate maturity deposits

             - Decay analysis,
             - Replicating portfolio analysis
             - Econometric/reduced form models
             - Other techniques

  • Pre-payable loans

             - Understanding path dependent options
             - Adjusting option exercise for transaction costs
             - Multi-factor models
             - Other rate sensitive cash flows 

Measuring Interest Rate Risk Summary

  • Duration and EvE comparison
  • Gap, Duration, EaR and EvE comparisons
  • Model methodology grade card
  • EaR, EvE, the direction and timing of IRR exposures
  • Best practice measurement recommendations

IRR Group Exercises

  • Calculating Gap
  • Calculating Earnings at Risk
  • Calculating Duration of Equity
  • Calculating Economic Value of Equity

Each attendee must have a laptop or equivalent computer with software such as MS Excel ®that does present value calculations.

Review

DAY 2


LIQUIDITY RISK ON THE BANKING BOOK


 Measuring and Monitoring Liquidity Risk

  • Liquidity risk overview and critical tasks
  • Components and characteristics
  • Liquidity ratios and traditional metrics
  • Cash flow forecasts
  • Best practice liquidity risk measurement

 Liquidity Scenarios and Stress Levels

  • Scenario and stress testing: purposes and requirements
  • Stochastic Stress Tests: Liquidity VaR
  • Deterministic scenarios

                 - Idiosyncratic scenarios
                 - Systemic scenarios
                 - Combination scenarios and contagion
                 - How many scenarios?
                 - Describing scenarios

  • Defining and using severity or stress levels

                 - Degrees of severity
                 - Worst case stress vs plausible stress
                - How many stress levels?

  • Reverse stress tests
  • Scenario and stress test summary

 Liquidity Stress Testing

  • Understanding Stress Test Objectives
  • Step-by-step process review – Eight Steps
  • Liquidity Stress testing summary

Developing Deposit, Off Balance Sheet and Other Liquidity Stress Test Assumptions

  • Key elements, drivers and sources
  • Cash and “due from”/nostra
  • Cash flow from securities
  • Cash flows from loans
  • Cash flows from liabilities
  • A Three step process for estimating cash flows from deposits and non-deposit liabilities

                - Multi-factor scoring model
                - Rankings
                - Application of historical data

  • Secured and unsecured wholesale funding
  • Assumptions for loans from and to financial institutions
  • Estimating cash flows from off balance sheet commitments

                 - Methods for 8 categories of off balance sheet exposures

  • More thorny issues
  • BIS assumption guidelines
  • Consistency and Escalation

                  - Worksheets for documenting and managing assumptions

Liquidity Funding Crisis Case Studies

  • Northern Rock
  • IndyMac
  • Bear Stearns
  • BEA
  • Wachovia Bank
  • Dexia Bank

Review

DAY 3


ALM RISK MODELING, MANAGEMENT

Effective Risk Modeling

  • Choosing models
  • Data requirements
  • Data aggregation
  • Using models
  • Back testing your earnings forecast and components
  • Back testing EVE components
  • Model risk
  • Understanding model risk and the life cycle of models
  • Regulatory requirements for models and model validations

 Managing Interest Rate Risk

  • IRR management overview
  • Risk minimization versus risk positioning
  • Managing interest rate risk without derivatives
  • Managing interest rate risk with derivatives: Learn the role and overview of (OTC) derivatives in exposure management
  • Optimizing EaR and EVE
  • Differences between interest rate risk management tactics and strategies

               - Hedge accounting issues for macro and micro hedges

 Managing Liquidity Risk

  • Tactics and strategies
  • The connection between stress tests and balance sheet management

               - Managing time

  • Concentration / diversification overview
  • Liability diversification: The Good, The Bad and the Ugly

              - Diversification by number of sources
              - Diversification by type of source
              - Diversification by size
              - Volatile liability concentrations

  • Managing the stress testing process: what not to do
  • Managing intraday liquidity risk

 Key Risk Indicators, Liquidity Contingency Planning and Event Management

  • Overview and requirements for best practice contingency plans
  • Early Warning / Key Risk Indicators / Key Performance Indicators including over 30 internal and external indicators of balance sheet risk, credit risk, funding risk, concentrations and diversification.
  • Invocation and Escalation
  • Identifying and estimating secondary sources of funds
  • Linking stress tests to contingency planning
  • The event management committee
  • Confidence management
  • Internal and external communication
  • Plan testing

 Effective Risk Governance – Concepts and Structure

  • Risk appetite: top down methods, bottom up methods and synthesis
  • Risk Culture
  • Risk management organizational structure and the role of Treasury

              - Traditional treasury organization
              - CRO organization structure
              - Alternatives and examples
              - Centralized or decentralized
              - Consolidated or unconsolidated
              - Four mandatory views

  • Risk strategies
  • Risk limits

              - Risk limit overview
              - IRR limits
              - Liquidity risk limits
              - Level 1, level 2 and level 3 limits

 Effective Risk Governance – Practices and Tactics

  • Building a better ALCO
  • Best practice reports to improve the effectiveness of risk managment

              - Interest rate risk reports
              - Liquidity risk reports

  • Risk management oversight
  • Role of internal audit in risk management
  • Best practice policies

               - Contents of interest rate risk policy
               - Contents of liquidity risk policy

  • Governance summary

Review

DAY 4


ALM RISK GOVERNANCE, APPLICATION TO CAPITAL AND EARNINGS


 Basel III and Liquidity Regulation

  • Global regulations
  • Basel III Liquidity Coverage Ratio: requirements and problems
  • Basel III Net Stable Funding Ratio: requirements and problems
  • Basel III Other metrics
  • Basel III Summary

 Overview of FTP, LFTP and RAROC

  • Introduction to FTP
  • Interest rate risk FTP

               - Loans
               - Deposits

  • Pricing goals
  • Regulatory requirements for liquidity FTP
  • Conceptual requirements for liquidity FTP
  • LFTP for current, mismatch liquidity risk

              - Standard method
              - Problems, advantages and disadvantages

  • LFTP for contingent liquidity risk

                - Simple method
                - Alternative method
                - Other approaches

  • Combining the LFTP pieces
  • Best practice LFTP recommendations
  • Introduction to Risk Adjusted Return on Capital --- enhancing capital management and performance measurement

Testing Understanding

 Liquidity Stress Simulation

One computer with spreadsheet software such as as MS Excel ®will be required for every four attendees.


Course summary and close

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