Early Warning Signals in Banks

Fitch Learning
Training overview
2 days
2,195 GBP
English
Next start date: 11/25/2019 - London
Classroom / Public

Course description

Early Warning Signals in Banks

This two-day intensive course will provide a structured approach for identifying early warning signals in financial institutions.

This course gives 16 CPD hours.

Who should attend?

This course is designed for experienced regulators, credit risk and fixed income professionals with a good understanding of the analysis of financial institutions.

Training Content

Day One

Analytic Overview

This section provides a structured framework of analysis highlighting early warning signals of distress and recurring themes in troubled credits.

Signs of distress
  • Common themes in troubled financial institutions: excessive growth, over-concentration, volatile earnings sources, asset and liability mismatches, dependence on unstable funding
  • Symptoms of a company's deteriorating credit standing: financial, non-financial and market indicators
Structured analytic approach
  • Four step approach to focus on key issues: purpose, payback, risks and structure
  • Purpose of the exposure and sources of payback: importance of refinancing in financial institutions, challenges to downsizing assets and availability of external support
  • Risks to repayment: Identify the key macro, sector and company specific business and financial risks which might jeopardise repayment
  • Structure: conclude on appropriateness of the facilities, assess the level of protection and critique the pricing to assess the risk: return

Operating Environment

This section will focus on key macroeconomic and sector trends, which are likely to erode creditworthiness, identifying potential areas of stress going forward.

  • Systemic risks within a financial system: macro variables, competitive pressures, shadow banking system, quality of regulation and supervision
  • Support for the banking system: too big to fail or too big to rescue?
  • Origins of the credit crunch: sub-prime, structured finance (MBS, CDO, SIVs and ABCP), leveraged loans, dependence on interbank and etc
  • Key market risks: including funding problems in the Eurozone and other countries, commercial real estate exposures in Europe and the US
  • Potential impacts of forthcoming regulatory changes: Basel III, Dodd-Frank

Management and Shareholders

This section will focus on comparing management responses to a challenged sector.

  • Companies in crisis: recognizing weak management and lack of integrity
  • Risk management challenges: liquidity, reputation, operational risk
  • Disclosure and corporate governance concerns
  • Inter-group support: ability of a stressed parent company to support subsidiaries

Day Two

Business Risk

This section will focus on companies with challenged business models and companies in crisis.

  • Credit risk: asset quality in the loan book; excessive growth and concentrations, hidden impaired loans; using surveillance reports to anticipate credit risk problems
  • Market risk: stress and back testing VaR indicators, acceptable levels of exposure to structural interest rate and FX risk
  • Derivatives: hidden credit and market risks; appropriate exposure levels
  • Performance risk: assessing earnings volatility

Financial Risk

This section will focus on the stability of a company's funding structure and the ability to withstand solvency and liquidity crises.

  • Assessing the diversity and stability of funding sources: refinancing risk: quantifying liquidity and financial flexibility
  • Asset and liability management concerns: FX, interest rate and maturity mismatches
  • Liquidity risk management: managing and stress testing transaction and funding stability
  • Securitization vehicles: liquidity exposure to conduits, servicing rights and other residual interests, sub-prime risks
  • Double leverage: challenges of a leveraged holding company
  • Solvency: stress testing quality and adequacy of capital to withstand write-downs

About Fitch Learning

Fitch Learning - Financial Training in the Americas

Fitch Learning

Part of the Fitch Group, Fitch Learning partners with clients to enhance knowledge, skills and conduct. With centers in London, New York, Singapore, Dubai and Hong Kong, we are committed to questioning and understanding client needs across the globe and...


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