Course dates
Course Overview
This two day course on liquidity risk management for banking institutions focuses on the best practices undertaken by leading financial institutions after the lessons learned from the global financial crisis. The course tackles liquidity risk in conjunction with other risk categories, such as market and credit risk.
The course focuses on all relevant liquidity risk measures that are being adapted to reflect the newly created complexities of modern financial markets such as analytics, forecasting, measurement and risk indicators & metrics. In addition, the course will cover the key areas of funds transfer pricing, stress testing, contingent planning and the new regulatory requirements under Basel III.
Summary of course content
- Look critically at liquidity risk and determine how it can be managed and controlled
- Understand and implement best practice processes in accordance with regulatory requirements (Basel III, Dodd- Frank, etc)
- Implement appropriate policies and processes
- Understand fund transfer pricing (FTP) and implement a transfer pricing system
- Understand liquidity risk metric and liquidity stress testing
Methodology
Teaching methodology will include discussions and casework.
Who Should Attend?
- CFOs, CROs
- Liquidity risk managers
- Market risk managers
- Treasury executives
- Traders
- Finance / capital planning executives
- Auditors (internal & external)
- Regulators
Supporting publication
Day 1
The global financial crisis and failures of financial institutions
- Review, conclusions, and outlook
Regulatory issues
- Basel II: pillar III disclosure requirements on liquidity
- Basel III developments
- What is Basel III?
- Implications for financial institutions
Case study:
The Basel III ratios: liquidity coverage ratio and the net stable funding ratio
- Inter-relationship between liquidity regulation, capital adequacy and other prudential measures
- The regulatory regime: qualitative and quantitative standards
- Regulatory responses to liquidity problems: guarantees, insurance, recapitalisation, bad banks
- Examining regulatory responses and options to bank resolution in a crisis, distinguishing liquidity failure
from solvency failure
- Where does it all go and what impacts do all regulatory changes have?
- Dodd-Frank Act in the United States
Analytic overview / governance
- Forms of liquidity
- Defining liquidity risk: funding and market liquidity
- Funding appropriate for the risk profile and commercial needs of the assets, products and business lines
- Stability, diversity and tenor matching of funding sources
- Key issues: off balance sheet, derivatives, securitisation, intraday
- Gap management across tenor and currency buckets
- Strategy for liquidity risk, policies and practices
- Fundamental principles (Basel Principle 1): risk management framework within the overall risk management of a bank
- Inter-relationship between liquidity, credit, market, operational, legal and reputation risks
- Organisational issues
- Internal controls
Intragroup liquidity transfers – fund transfer pricing (FTP)
- Overview of fund transfer pricing
- Improvement of cash flows, earnings, risk and value through FTP
- Alternative methods and addressing fund transfer pricing objectives
- Approach for implementation of fund transfer pricing mechanism
- Adjustment for other factors beyond the benchmark
- Using the FTP for performance forecasting and measuring branch profitability
- Incentives, policies and procedures
- Practical challenges
Day 2
Forecasting, measuring and monitoring funding requirements
- Future cash flows of assets, liabilities and offbalance sheet items
- Forecasting funding cash flows over different time horizons: intraday, day to day, under and over a year
- Estimation of funding capacity
- Asset and funding diversification strategies
- Liquidity position by currency, cross-border and legal entity
- Liquidity by maturity
- Modelling non-maturing products for interest rate and liquidity models
- Cash flow of financial derivatives
- Haircuts
Measuring market risk: liquidity-adjusted valueat- risk (VaR)
- Definitions
- Using liquidity-adjusted VaR to manage risk
- Limitations of standard VaR measures to assess liquidity
Liquidity risk metrics and limits
- Range of liquidity metrics
- Maturity mismatch approach – gap analysis
- Modelling behavioural adjusted liquidity gaps – best practices
- Concentration risk
- Liquidity at risk
- Market indicators
- Liquidity ratios
- Limits and risk tolerances
- Internal and external communications
Liquidity stress testing
- Why stress test liquidity?
- General considerations
- Current stress test priorities
- Sensitivity and scenario analysis
- Assumption sensitivity
- Additional considerations
Case study:
Reverse stress testing in practice for trading books
Contingency planning
- Contingency planning governance
- Asset reduction and financing strategy
- Sources of contingent liabilities
- Cushion of assets
- Back up liquidity: unencumbered assets, liquidity pool, committed facilities, Central Bank’s marginal
lending facilities
InterContinental Grand Stanford Hotel, Hong Kong, Hong Kong
This programme takes place on a non-residential basis at the InterContinental Grand Stanford Hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Peter Buerger
Peter Buerger is Partner in the Frankfurt office of financial risk fitness. In his more than 20 years in the financial services industry, Peter has managed both strategic and operational functions and was accountable for projects of various sizes – both within Germany and internationally.
His core area of work and experience is in risk management. Prior to his current role, Peter worked for large international financial institutions, i.e. as Global Head of Risk Control for Commerzbank Group in Frankfurt, Germany and as Head of Strategic Risk Management & Control for HypoVereinsbank / UniCredit Group in Munich, Germany. Peter also brings in operative risk management experience from his role as branch manager for Commerzbank’s business in London, United Kingdom. In this role, Peter was responsible for credit risk management in the region “Western Europe and South Africa”, which included a significant credit sanctioning competence.
Besides pure risk management, Peter‘s consulting focus will also link into the subjects strategy, governance, portfolio restructuring, compliance, cost cutting and post-merger integration. Peter‘s expertise and experience covers a broad business and product spectrum - retail banking, corporate lending, investment banking,
asset management, commercial real estate. Peter was educated in the United States; he holds an MBA from Long Island University in New York. He also completed the Advanced Management Program at the INSEAD Business School in Fontainebleau, France.
Courses run by this instructor
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Course dates