Bank Capital Management - Capital Planning, Fund Transfer Pricing and RAROC
Dates: September 23 - 25, 2019
Price: EUR 1,755
Location: Prague, NH Hotel Prague
Lecturer: Jean-Bernard Caen
Understanding the Role of Banks Capital
Articulating Capital, Risk and Return
Risk Identification, Measurement and Aggregation
Regulatory and Economic Capital Assessment
Internal Funds and Risk Transfer Pricing
Forward-Looking View and Capital Allocation to Businesses
Risk-Adjusted Performance Measurement and Monitoring
How to link risk, return and capital to maximize the bank's value creation?
The purpose of this seminar is to give you a clear understanding of what is banks capital and how to use it to create value. Banks are currently managed using two desynchronized steering wheels: The regulatory framework that ignores profitability, and the accounting framework that - until recently - ignores risk. Economic Capital and IFRS 9, increasing competition from FinTechs and the need for a better servicing of the economy are promoting a review of how banks manage their capital. This seminar clarifies for you the issues and the practical ways to handle them.
The three days are articulated as follows: On day 1, we clarify the nature of capital and its articulation with risk and return; On day 2, we learn how to measure economic risks so that the results are usable both for micro- and macro-management decision support; On day 3 we enter the internal mechanics of transferring funds and risks within the bank and still retaining the coherence required for proper performance assessment and the support of management actions.
Day 1 starts with the exploration of the different capital metrics: Regulatory, accounting and economic. We look at the multiple components of capital and their "raison detre". Once the articulation between capital and risk is clearly defined, we address the issues of risk appetite and tolerance, capital usage and allocation. We end the day with the RICAP, the process used to identify and classify risks.
Day 2 is entirely dedicated to Economic Capital. It is a key component of banks capital management. In its aggregate form, it measures the need for capital. It constitutes a risk metrics that is neutral and transverse, applicable to all measurable risks. We look at how to link Economic Capital with profitability and capital measures, to provide powerful top to bottom performance measures and efficient management decisions support.
Day 3 addresses the intricacies of moving capital, risks and funding within the bank in such a way that performance and risk indicators remain relevant and efficient for any subset of the bank, at any level of aggregation.
And we conclude the seminar with issues related with macro-prudential considerations: what issues are born from the discrepancies between the views of regulators and of shareholders regarding capital levels, and what are the challenges this creates for banks and for the economy as a whole.
Monday, September 23
09.00 - 09.15 Welcome and Introduction
09.15 - 12.00
The Nature and Utility of Banks Capital
Why do banks need capital?
The regulatory, accounting and economic views of capital
Capital regulation from Basel 1 to Basel 4 and beyond
Accounting capital, its components and the role of equity
Economic capital and value creation
Capital allocation and financial planning
The Articulation between Capital and Risk
Capital as a means to take risks and generate profits