Basel ii and the implementation in the European Union via the Capital Requirements Directive (CRD)

Course Title
Basel ii and Capital Requirements Directive Training:
The new Basel Accord (Basel ii) and the implementation in the European Union via the Capital Requirements Directive (CRD)
5 days

The seminar has been designed to provide with the knowledge and skills needed to understand and support Basel II compliance in EU.

Target Audience:
This course can be customized to meet the needs of:
C – Level Executives and Boards of Directors
IT and Information Security Directors, Managers and Professionals
Chief Risk and Compliance Officers
IT and Security Process Owners
Network, System and Security Administrators
IT Auditors
IT, Security and Management Consultants

5 Days, 09:00 to 17:00.

Course Synopsis:

· From The Bank for International Settlements (BIS) to the Capital Requirements Directive
· The Bank for International Settlements (BIS)
· The Basel Committee on Banking Supervision
· Regulatory supervision of internationally active banks
· From the failure of the Bankhaus Herstatt and the crisis of confidence to the Basel i and ii frameworks
· From the Basel ii framework to the Capital Requirements Directive
· Too many levels of freedom, too many challenges and difficulties for the national supervisors

· The First Basel Capital Accord
· Assets are weighted by factors
· On-balance sheet
· Off-balance sheet
· Examples of capital requirements
· Basel I amendments

· The New Basel Capital Accord (Basel II)
· Realigning the regulation with the economic realities of the global banking markets
· How much capital is necessary to serve as a sufficient buffer?
· Improving risk and asset management
· The technical challenges for both banks and supervisors
· The three-pillar regulatory structure
· Purposes of Basel II
· Scope of the application
· Pillar 1: Minimum capital requirements
· Credit Risk – 3 approaches
· The standardized approach to credit risk
· Claims on sovereigns
· Claims on banks
· Claims on corporates
· The two internal ratings-based (IRB) approaches to credit risk
· Some definitions: PD - The probability of default, LGD - The loss given default, EAD - Exposure at default, M – Maturity
· 5 classes of assets
· Pillar 2: Supervisory review
· Key principles
· Aspects and issues of the supervisory review process
· Pillar 3: Market discipline
· Disclosure requirements
· Qualitative and Quantitative disclosures
· Guiding principles
· Employees Affected
· Effective Dates

· Framework for internal control systems in banking organizations - Basel Committee on Banking Supervision
· The 13 Principles for the Assessment of Internal Control Systems
· The 13 Principles and COSO
· The control environment
· Risk assessment
· Control activities
· Information and communication
· Monitoring
· Types of control breakdowns typically seen in problem bank cases
· The objectives and role of the internal controls framework
· The major elements of an internal control process
· Evaluation of internal control systems by supervisory authorities
· Role and responsibilities of external auditors
· Supervisory lessons learned from internal control failures

· Operational Risk
· What is operational risk
· Legal risk
· Information Technology operational risk
· Operational, operations and operating risk
· The evolving importance of operational risk
· Quantification of operational risk
· Loss categories and business lines
· Operational risk measurement methodologies
· Identification of operational risk
· The Delphi method

· Operational Risk Approaches
· Basic Indicator Approach (BIA)
· Standardized Approach (SA)
· Alternative Standardized Approach (ASA)
· Advanced Measurement Approaches (AMA)
· Internal Measurement Approach (IMA)
· Loss Distribution (LD)
· Standard Normal Distribution
· “Fat Tails” in the normal distribution
· Expected loss (EL), Unexpected Loss (UL)
· Value-at Risk (VaR)
· Value-at Risk and Basel I amendment, 1996
· Value-at Risk and Basel II
· Calculating Value-at Risk
· Monte Carlo simulations
· Monte Carlo limitations
· Extreme Value theory
· Scoreboards
· Stress Testing
· Stress testing and Basel
· (AMA) Advantages / Disadvantages
· Recognition of the firms’ own modelling of operational risk losses
· “Weak banks”, internal and external audit and sound practices for operational risk
· Self assessment
· Key Risk Indicators
· Operational Risk Measurement Issues
· The game theory
· The prisoner’s dilemma – and the connection with operational risk measurement and management
· Operational risk management
· Operational Risk Management Office
· Key functions of Operational Risk Management Office
· Key functions of Operational Risk Managers
· Key functions of Department Heads
· Internal and external audit
· Operational risk sound practices
· Operational risk mitigation
· Insurance to mitigate operational risk

· Third-party service providers and vendors
· Redefining outsourcing
· Outsourcing services and Basel II compliance
· The new definition of outsourcing
· Outsourcing after Basel II
· Offshore outsourcing is also redefined
· Key risks of outsourcing
· What is needed from vendors and service providers

· Capital Requirements Directive (CRD)
· Harmonizing Europe with Directives
· Directive 2006/48/EC
· Subject matter, scope and definitions
· Requirements for access to the taking up and pursuit of the business of credit institutions
· Provisions concerning the freedom of establishment and the freedom to provide services
· Relations with third countries
· Principles and technical instruments for prudential supervision and disclosure
· Provision against risks
· Calculation of requirements
· Minimum own funds requirements for operational risk
· Large exposures
· Qualifying holdings outside the financial sector
· Disclosure by credit institutions
· Powers of execution
· Transitional provisions
· Directive 2006/49/EC
· Subject matter and scope
· Initial capital
· Trading book
· Own funds
· Provisions against risks
· Application of requirements on a consolidated basis
· Calculation of consolidated requirements
· Monitoring and control of large exposures
· Valuation of positions for reporting purposes
· Risk management and capital assessment
· Reporting requirements
· Competent authorities
· Supervision
· Powers of execution

· Home and Host Supervisors
· Cross-border challenges
· The Accord Implementation Group
· Implementing Basel II Across Countries
· Differences: The European Union and the USA, Middle East, Pacific Rim, Caribbean
· The implementation of Basel II around the globe
· Markets in Financial Instruments Directive (MiFID)
· From Basel ii to Mifid
· The impact of MiFID to EU and non EU banks
· Aligning Basel II operational risk and Sarbanes-Oxley 404 projects
· Common elements and differences of compliance projects
· New standards
· Disclosure issues
· Multinational companies and compliance challenges

The course can be customized to meet specific needs