MANAGING COUNTERPARTY CREDIT RISK, BASEL III AND RECENT REGULATORY ISSUES 7 – 8
Transcription
MANAGING COUNTERPARTY CREDIT RISK, BASEL III AND RECENT REGULATORY ISSUES 7 – 8
MANAGING COUNTERPARTY CREDIT RISK, BASEL III AND RECENT REGULATORY ISSUES 7th – 8th May 2015, KUALA LUMPUR Key Highlights: • Counterparty Credit Risk – Exposure at Default (‘EAD’) in Trading Books • Basel ll Counterparty Credit Risk (CCR) Capital Framework – Credit Risk Capital Calculation Methods Analysed and Compared • Counterparty Credit Risk – Key Areas of Basel 2.5 and Basel lll Reforms • Evolving Counterparty Credit Risk Implications of the Basel Committee ‘Fundamental Revision of the Trading Book’ Proposals Expert Course Director Douglas Bongartz-Renaud Former Global Head of Rate Derivatives and Structured Products, ABN AMRO SIDC CPE - accredited: 10 CPE Points Visit www.REDmoneytraining.com today or call +603 2162 7800 for more information Introduction Over the past twenty five years, counterparty credit risk exposure has grown in tandem with the complexity of financial products into one of the most challenging areas of credit risk computation and management. With the onset of the global financial crisis, counterparty risk exposure management has played an increasingly important role in transaction pricing and risk capital calculations. The area of credit risk exposure measurement and management in bank trading book activities is particularly challenging and complex due to the interaction between market risk and credit risk. Effective trading credit exposure measurement and management methods are becoming increasingly important to banks in managing capital. This course will analyse the cost benefit of different approaches of effectively managing capital under the rapidly developing regulatory requirements. Recent developments such as OTC central clearing of derivatives (CCPs), initial margin requirements for non-cleared transactions, and the new Basel Standardised Approach (NIMM) requirements for calculation of exposure-at-default (‘EAD’) on counterparty trading book transactions will be explained with examples. The two day program will also cover Basel 2.5 Specific Risk Charges, Incremental Risk Charges, and the Comprehensive Risk Measure which are designed to adjust the credit risk/ market risk capital boundary between banking and trading books. Additionally, the course will examine the additional measures being framed into the current Basel Fundamental Review of the Trading Book process, and in the 2013 Basel Non-Internal Model Method Counterparty Credit Risk Capitalisation proposal. Learning Objectives • An overview of how the global financial crisis has reshaped interbank financial market activities and the view of regulators on required reforms • Basel 2.5 Incremental Risk Charge modelling which adds credit migration loss risk to default risk in the trading book risk capital framework • Basel lll ‘Enhancing Risk Coverage’ measures focus extensively on counterparty credit risk in key areas such as the new CVA Risk Capital Charge, wrong way risk, asset value correlation, central clearing counterparties, and modifications to the IMM requirements for calculating EAD in trading books • The Basel Committee on Bank Supervision (BCBS) proposals for ‘Fundamental revision of the trading book’ relating to counterparty credit risk • Examples and case studies demonstrating and comparing calculation of counterparty credit risk as it is developing under the above requirements Who should attend? • Credit and market risk managers /risk control & audit professionals • Treasury/financial markets trading, sales & middle office professionals • ALM professionals & ALCO members • • • • Relationship managers Finance & strategic planning professionals Consultants & service providers to the banking industry Banking supervision professionals and banking industry analysts Course Agenda Day one Counterparty Credit Risk – Exposure at Default (‘EAD’) in Trading Books This module will provide the concepts and framework for internal limits-based counterparty credit risk exposure and, Basel risk capital calculations, along with credit risk-based pricing of transactions on an individual and counterparty ‘netting set’ basis, covering: • Credit risk exposure measures defined and explained, including Current Exposure (CE), Expected Exposure (EE), Expected Positive Exposure (EPE) and Potential Future Exposure (PFE) • Market risk and market risk factor sensitivity in trading book credit risk: calculating EAD • Calculating credit risk on a portfolio basis with netting (ISDA M/A) and collateral (ISDA CSA) agreement complexity • Calculating future exposure on individual transactions and on counterparty transaction ‘portfolios’ • Short-cuts in EAD calculation (PFE tables) and calculating Credit Conversion Factors (CCF) for more complex financial products • Application of internal exposure measures: PFE for internal exposure limits, EE/EPE for risk capital requirement calculations, and CVA for pricing credit risk in transactions and netting sets Case Study: Calculating and using PFE and EPE tables for interest rate swaps and FX outright forward transactions Basel ll & lll Counterparty Credit Risk (CCR) Capital Framework with Post Financial Crisis Revisions – Credit Risk Capital Calculation Methods Analysed and Compared This module will provide the participant with a solid understanding and cost/benefit analysis of the Basel compliant calculation options for measuring and managing CCR and credit risk capital in trading books. The module will cover: • Basel EAD calculation methods in detail: Current Exposure Method (CEM), Standardised Method (SM) and Internal Model Method (IMM) • The new Basel EAD Standardised Approach calculation requirements – replacing the ‘Non IMM’ (CEM and SM) approaches in 2017 (with calculation examples) • Initial margin requirements for cleared and non-cleared derivatives, rules concerning ‘margin period of risk’, and calculation of initial margin based on margin period of risk • Systems implications and requirements for measuring and managing CCR under the different EAD calculation approaches • The Basel ll Banking Book/Trading Book ‘boundary’: the shifting balance between credit risk and market risk focus • Basel credit risk: Expected Loss vs. Unexpected Loss and Credit Valuation Adjustment (‘CVA’) capital and risk management requirements under both credit loss measures • Counterparty credit risk mitigation methods: close-out netting (ISDA), collateral (CSAs) and OTC central clearing (CCPs) • Basel lll ‘Enhancing Risk Coverage’ (part-1): Asset Value Correlation (AVC), collateral margining period of risk limits, Visit www.REDmoneytraining.com today or call +603 2162 7800 for more information and stressed market risk factor data for EAD/IMM exposure calculations • OTC central clearing requirements and market structure: US Agency (FCM) and non-US (ISDA based) CCP structures frameworks and mechanics. Economic benefit analysis of central clearing Case Study: The Impact of netting - CEM vs. IMM, how effective is the CEM Net Gross Ratio (NGR) as a netting set exposure estimation method? The proposed replacement of the CEM (Basel 2013 Non-Internal Model Method Counterparty Credit Risk Capitalisation) Day two Counterparty Credit Risk – Key Area of Basel 2.5 and Basel lll Reforms This module focuses on the regulatory measures being taken in the aftermath of the global financial crisis to increase credit risk capital in banks, particularly in the trading books. We will explain and analyse the wide range of CCR requirements included under Basel 2.5 and Basel 3 and their implications, including: • CCR developments and problems in the interbank funding and financial markets liquidity (demise of LIBOR); • Introduction to Credit Value Adjustment (CVA) o Counterparty credit risk spread (PD * LGD) and Expected Loss vs. Unexpected Loss o Counterparty exposure at default (applying EE/EPE) across regular and irregular cash flow instruments (comparison of CVA calculation on FX forwards and interest rate swaps) o Managing CVA: bank trading book vs. banking book approaches • Basel 2.5: adding credit risk migration-based loss risk to default loss risk in trading book capital and narrowing the credit risk capital differences between trading and banking books o General risk charge vs. specific risk charge in trading books (and implementation of SRC in VaR) o Incremental Risk Charge (‘IRC’) requirements (adding credit migration, default, and liquidity risks to trading books on 1-year horizon basis) o Comprehensive Risk Charge (banking book capital treatment for credit correlation products) • Basel lll: ‘Enhancing Risk Coverage’ (part 2): wrong-way risk measurement, CVA Risk Capital Charges, Risk-Neutral vs. Historical PDs, credit risk capital allowances for both single-name multi-name (index-based) credit risk hedging instruments, treatment of OTC central clearing transactions • The appropriate PD measure: market-based (‘risk-neutral of CDS-based) vs. ‘Real World’ (actuarial based) and explanation of the differences and appropriate applications of each measure • CVA Risk Capital Charges: credit risk vs. market risk factor exposures treatment • Wrong Way Risk measurement and management: modelling and measurement challenges Case Study: Impact of the Basel lll CVA Risk Capital Charge: standardised vs. advanced compared Case Study: Identifying and pricing wrong-way risk in FX-based transactions Evolving CCR Requirements – Implications of the Basel Committee ‘Fundamental Revision of the Trading Book’ Proposals and Other G-20 and Basel Committee Initiatives (in Progress) This module will focus the current inconsistencies and double counting in the current overall CCR approach in the Basel framework since the additional requirements added under Basel 2.5 and lll. We analyse the statements and proposals made in the recently issued Basel consultative paper on forthcoming revisions to the treatment of trading books. We will focus on measuring the potential future impact on trading activities of banks and on global financial markets, covering issues such as: • Analysis of the proposals in the Basel ‘Fundamental Revision of the Trading Book’ proposals related to CCR • Harmonising the Basel CCR modelling approach: the challenges of integrating default, credit risk migration loss, and market liquidity risk into a single CCR measurement model • CVA Risk Capital Charge: hedging market risk factor exposure and the challenge of integrating CVA credit and market risk factor volatility into a single modelling framework • Developments in managing CVA/DVA/FVA (Funding Value Adjustment): pricing, risk management, risk capital calculation and management • EBA (European Banking Authority) Regulatory Technical Standards for Prudential Valuation (under EU Capital Regulation Requirements) for treatment of IAS required fair value adjustments and Additional Valuation Adjustments (AVA) under defined simplified and core approaches • Fair value accounting impacts on banks: the Basel lll Risk Invariant Leverage Ratio ceiling and the Debit Valuation Adjustment (‘DVA’) debate • Overview of OTC central clearing: status of G-20 implementation, US CFTC FCM agency CCP model compared to the EU EMIR (and Singapore SFA) model, and analysis of initial margin requirements on mandated products for cleared and required non-cleared OTC transactions Case Study: Measuring the impact of the Basel reforms, including CCR requirements on the trading books as well as capital, leverage and liquidity ratio rules. Assessing the implications of Basel reforms on bank strategic balance sheets, trading books and growth planning and the implications for future bank trading book activities. Expert Course Director Douglas Bongartz-Renaud has 36 years’ experience in financial markets, risk management, training and consulting. He retired from ABN AMRO Bank in 2011 and moved from Amsterdam to Asia, where he continues working with banks in the areas of Basel framework implementation, ALM, market and counterparty credit risk management, financial products and treasury trading development and training. Douglas designs and delivers detailed training workshops for clients, risk management conferences and trade associations such as ISDA, PRMIA, GARP and the ACI. He has trained on Basel 3, Funds Transfer Pricing, Liquidity Risk Management, Strategic Balance Sheet Management, Credit Value Adjustment and Counterparty Credit Risk, and Currency Options Trading and Structuring. In his last position, Douglas was a principle in ABN AMRO’s Risk Advisory Services business and established the market risk and treasury advisory practice. He and his team worked with over thirty client banks in Asia and MENA. Prior to this he was involved in risk management to structure and accelerate the process of complex derivative products development, validation and introduction. He was extensively involved with ABN AMRO’s preparation and implementation of the Basel capital framework, working on Basel 3 and on CVA pricing, management and capital planning in 2011. Previously, Douglas held the positions of Global Head of Currency Derivatives and Global Head of Rate Derivatives and Structured Products at ABN AMRO and was responsible for building the Bank’s front-office financial products development group. Douglas has provided extensive ALM consulting, training and implementation work in countries such as Egypt, Saudi Arabia, Indonesia, Malaysia and Brunei. He is frequently invited to speak at conferences offered by Islamic Financial Market (IIFM), the international Islamic financial services industry’s standard setting organization. Visit www.REDmoneytraining.com today or call +603 2162 7800 for more information Managing Counterparty Credit Risk, Basel III and Recent Regulatory Issues 7th – 8th May 2015, KUALA LUMPUR BOOKING DETAILS I am booking: Pricing 1 delegate MYR 6,600 2 delegates MYR 11,220 3 delegates MYR 15,840 Early bird offer: registrations received on or before 9th April 2015 shall attract a 2.5% discount. No discounts shall be given to registrations received after this cut-off. Please note: A late booking fee of MYR150 will be imposed on registration received within 14 days of the course start date. Fees include training materials, refreshments and lunch. Accommodation is not included. DELEGATE DETAILS Name Job Title Email address Telephone 1 ___________________________________ / ________________________ / ________________________________ / ___________________ 2 ___________________________________ / ________________________ / ________________________________ / ___________________ 3 ___________________________________ / ________________________ / ________________________________ / ___________________ 4 ___________________________________ / ________________________ / ________________________________ / ___________________ 5 ___________________________________ / ________________________ / ________________________________ / ___________________ WHO TO INVOICE AND CONTACT? Please tell us who we should invoice. It is also helpful for us to have the name of an administrator with whom we can liaise directly. Contact person for invoicing: ______________________________________________________ Job Title: ___________________________________ Email: ________________________________________________ Tel: ____________________________ Fax: _____________________________ Contact person to send administration details: ____________________________________________________________________________________ Job Title: __________________________________ Email: _________________________________________Tel: ___________________________ Payment can be made by cheque or bank transfer. A notification will be sent to you once payment has been received. I wish to pay by: Cheque/bankers draft Telegraphic transfer Credit Card Please note all telegraphic transfer fees, taxes and levies (domestic or otherwise) shall be borne by the sponsoring organization. Payment made by foreign cheque will be charged additional bank fees of 1% of the invoice amount. APPROVING MANAGER To process your registration we require the name and signature of a manager who is authorized by your organization to approve training expenditure. Name: _________________________________________________________________ Job Title: _______________________________________ Organization name: ___________________________________________ Email: ______________________________ Tel: _____________________ Authorizing signature __________________________________________________________(mandatory) Yes, I have read and understood the booking and cancellation policy below. SEND US YOUR REGISTRATION! By email: [email protected] By fax: +603 2162 7810 You may also book online at http://www.REDmoneytraining.com Please call us on: +603 2162 7800 or +603 2162 7802 if you require assistance. Our address is: REDmoney, Suite 22-06, 22nd Floor, Menara Tan & Tan, 207, Jalan Tun Razak, 50400 Kuala Lumpur Booking, Payment and Cancellation Policy – important, please read carefully By completing, signing and sending us this registration form you are confirming delegate places on the course. You are also confirming your understanding of our Booking, Payment and Cancellation Policy. Cancellation: If delegates cannot attend the course replacement participants are always welcome. Otherwise delegates must request in writing (letter, fax or email) to cancel registration/s or transfer to a different course at least 21 days before the course start date to be eligible for a refund, less a 5% administration fee. Delegates who cancel within 21 days of the course start date, or who do not attend, are liable to pay the full course fee and no refunds will be given. Instead fees will be converted to a REDmoney Training course voucher equivalent to the original fee, less a 15% administration charge. This voucher is transferable within your organization and must be redeemed within one year of issue or become void. If a course is postponed for whatever reason delegate bookings will be automatically transferred to the new course date. Delegates who wish to transfer to a different course will be subject to the same terms as above and charged the difference in course fees. No refunds or course vouchers will be issued for a no-show. Payment Terms: All course fees are to be received before the course start date. REDmoney shall receive the full course fee with no deductions of any description. All telegraphic transfer fees, taxes and levies (domestic or otherwise) shall be borne by the sponsoring organization. © REDmoney reserves the right to amend the published program or speaker. In the event of course cancellation by REDmoney due to unforeseen circumstances, REDmoney is liable only to refund the cost of the course. Course Venue: Full details of the venue will be sent to you upon registration. RMT1509/P