Intensive Bank Analysis

Fitch Learning
Training overview
3 days
3,895 USD, 3,595 EUR, 2,895 GBP
English
Classroom / Public
Next start date: 12/4/2019 - New York City
Start dates
Amsterdam
12/4/2019   (English)
3,595 EUR
New York City
12/4/2019   (English)
3,895 USD
London
12/11/2019   (English)
2,895 GBP

Course description

Intensive Bank Analysis

The overall goal of this three-day course is to provide participants with a structured approach to analyzing the credit risk of developed market, commercial and universal banks and the skills to make an independent assessment of the strengths and weaknesses of a bank.

This course gives 24 CPD hours.

Who should attend?

This is an intermediate level course for credit risk management, fixed income, origination and regulatory professionals.

Training Content

Day One

Analytic Overview

This section provides a structured framework of analysis including the use of market indicators.

  • Overview of the framework and tools of bank analysis: operating environment, financial fundamentals, management and support
  • Purpose and payback model: a structured approach to credit analysis
  • Key issues in exposures to banks: exposure profile, seniority, safeguards, pricing
  • Rating agency approaches: issuer ratings, individual / financial strength and support ratings
  • CAMELS (capital, assets, management, earnings, liquidity, sensitivity to market risk)
  • Market perspective on credit: equity indicators, credit default swap and bond market indicators
  • Exercise: understanding and applying the purpose payback model and demonstrate the typical borrowing needs and repayment capacity of a commercial bank

Operating Environment

This section focuses on the impact of external factors on the banking systems, including the economic environment, competitive environment and regulatory and supervisory pressures.

Macro - economic and systemic issues

  • Impact of macro - economic variables on performance
  • Bank systemic risk: macro prudential indicators
  • Macro prudential indicators of risk; credit growth, equity and property prices and FX
  • Competitive and structural issues of the banking system

Regulation and supervision

  • Changing roles of the regulator and supervisor
  • Key regulations: purpose and implementation
  • Quality of regulation
  • Exercises:
    • Considering the impact on bank profitability of the operating environment in various countries
    • Consider and quantify the impact on bank capital adequacy ratios of the implementation of Basel III

Day Two

Financial Fundamentals

This section covers how to measure and evaluate bank performance, distinguish strong and weak performance and appreciate the limitations of the figures.

Statement logic

  • Relating business mix to financial statements
  • Accounting policies and disclosure: IFRS and local GAAP; fair valuation - securities, derivatives, own debt
  • Exercise: understanding how the business model of a financial institution impacts its financial statements

Business risk

  • Loan portfolio analysis: uncovering the risk profile; key differences between types of bank
  • Loan quality: impaired loans and reserve adequacy
  • Off balance sheet exposures: lending commitments, SIVs, conduits and other special purpose vehicles
  • Trading risk: assessing securities and derivatives portfolios, use of value at risk (VaR) models and stress testing
  • Investment risk: valuation and accounting policies, hidden reserve or black hole
  • Market risk for the banking book
  • Exercises:
    • The capital base and profitability of a bank may be influenced by their provisioning policies
    • Identify the risks prevalent in the trading operations of a commercial or investment bank
  • Illustration case study: assessing business risk, incorporating loan portfolio quality, trading portfolio and other credit and market risks

Performance risk - earnings

  • Balancing the risk/return profile: strategy and risk appetite
  • Income stability and diversity: earnings at risk
  • Control of expenses: targets and peer comparisons
  • Illustration case study: assessing performance of a bank, incorporating overall returns, income diversity and stability and cost control

Financial risk - liquidity

  • Funding risk: stability and variety of funding sources, contingency funding
  • Liquidity of assets: identifying truly liquid assets, stable funding of illiquid assets
  • Liquidity of liabilities: stability of deposit base, dependence on short - term
  • wholesale funding, inter - bank market, key challenges of repo and CP funding
  • Liquidity: quantitative and qualitative measures, Basel III liquidity guidelines
  • Liquidity: coverage ratio and stable funding ratio
  • Gap management: using the tenor and interest rate mismatch tables to better understand refinancing risk
  • Securitization vehicles: accounting and credit implications
  • Exercise: demonstrate how a bank's funding structure can impact its liquidity position and interest rate exposure

Financial risk - solvency

  • Capital: size, quality and adequacy of capital base under Basel I, II and III
  • Types of capital: core (common equity) vs. additional Tier 1 and Tier2
  • Standardized and advanced approaches for credit, market and operational risk
  • Leverage ratios: benchmarks and challenges
  • Capital adequacy: measuring size, quality and adequacy of capital base; regulatory capital ratios and assessing regulatory capital for non-deposit takers
  • Economic capital and internal capital adequacy assessment process (ICAAP)
  • Stress-testing capital for market and credit write-downs
  • Illustration case study: Assessing financial risk including solvency, funding strategy and liquidity in the light of the risk profile of the business model

Early warning signals

This section considers a variety of early warning signals which may indicate financial stress at a bank.

  • Financial and non-financial indicators of distress
  • Market indicators: equity, CDS and bond indicators
  • Lessons learned from failed banks
  • Exercise: distinguishing strong and weak players

Management, Franchise and Ownership

This section focuses on the key risk areas of strategy, franchise and risk management.

  • Management: strategy, systems, skills, structure
  • Risk management
  • Franchise: strength of banking business model

Support

This section considers which institutions may receive government or shareholder support and in what form that support may be received.

  • Bail-in vs. Bail-out; Living wills, BRRD and TLAC
  • Reliance on support: rating floors, which creditors are supported
  • Loss absorbing capability of various levels of capital including equity, preference shares, contingent convertibles, subordinated debt and senior medium term debt
  • Solvency vs. liquidity problems
  • Regulatory responses to banking crisis: recapitalization, guarantees, bad banks, insurance
  • Exercise: recognize the main approaches to support employed by governments and their pros and cons

Group Case Study

The goal of this closing case study is for participants to apply the analytic framework to identify the strengths and weaknesses in a developed market commercial bank.

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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Reviews

Muhamad Fazari
(5)
Good experience, we did not just learn from the trainer, but also sharing experiences and knowledge from other participants
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