Attend this intensive and highly practical 4–day training course and learn strategies, tools and techniques to:

• Measure interest rate risk on the banking book with practical advice on estimating risk in indeterminate maturity deposits
• Understand limitations of rate risk measurement methodologies and optimization of methodologies
• Measure liquidity risk on the banking book with practical emphasis on estimating the stickiness of liabilities on off-balance sheet exposures
• Step-by-step procedures for stress testing
• Management of rate risk with and without derivatives
• Management of liquidity risk
• Best practice risk reporting
• Best practice risk policies

Who Should Attend?

This course has been specifically designed for the benefit of:

• Bank treasurer
• Chief risk officers
• Rate risk managers
• Liquidity risk managers
• Rate risk analysts
• Liquidity risk analysts
• Internal auditors
   

 

DAY 1

ALM and Risk Overview

• Risk and volatility
• Financial institution risks
• Interest rate risk overview
• Liquidity risk overview

Measuring Interest Rate Risk

• Critical tasks and risk elements
• Gap analysis
• Earnings at risk
• Duration and duration of equity
• Economic value of equity
• Value-at-Risk

Group Exercises: EaR and EvE Simulation Modeling Calculating Earnings at Risk Calculating Economic Value of Equity Sensitivity

Interest Rate Risk Stress Testing

• Deterministic versus stochastic rate scenarios
• Parallel and twist scenarios
• Probable and improbable rate changes
• Yield curve smoothing and term structure models
• Model Perspectives

Deposit, Loan and Other Assumptions for IRR Modeling

• Indeterminate maturity deposits
• Pre-payable loans
• Other rate sensitive cash flows

Assumption Sensitivity Testing

• Examples of EaR sensitivity tests
• Examples of EvE sensitivity tests

Measuring Interest Rate Risk Summary

• Duration and EvE comparison
• Gap, duration, EaR and EvE comparisons
• Model methodology grade card

DAY 2

Measuring Liquidity Risk

• Cash flow forecasts
• Best practice liquidity risk measurement
• BIS proposed net stable funding ratio
• BIS proposed cash flow coverage ratio

Liquidity Scenarios and Stress Levels

• Choosing scenarios
  -Choosing stress tests
  -Value-at-Risk
  -A framework for scenario assumptions

Liquidity Stress Testing

• General requirements
• Step-by-step process review

Deposit, Off Balance Sheet and other Liquidity Assumptions

• Key elements
• Historical data
• Cash flows from securities
• Cash flows from loans
• Cash flows from deposits
• Cash flows from non-deposit liabilities
• Cash flows from off balance sheet commitments
• Additional assumption guidelines
• Documenting and managing assumptions

Liquidity Funding Crisis Case Studies Alpha Bank Northern Rock IndyMac Bear Stearns BEA Wachovia Bank

DAY 3

Effective Risk Modeling

• Choosing models
• Data issues
• Using models
• Backtesting EaR and EvE
• Components of model risk

Managing Interest Rate Risk

• Avoid, minimize, offset or hedge
• Managing interest rate risk without derivatives
• Managing interest rate risk with derivatives
• Optimizing EaR and EvE
• IRR management perspectives

Managing Liquidity Risk

• The big picture
• Managing Time
• Beyond liquid assets
• Liability diversification: the good, the bad and the ugly
• Lessons from the 2007-2008 crisis
• Summary

Effective Risk Governance – Concepts and Structure

• Risk appetite
• Risk management organizational structure and the role of treasury
• Risk culture
• Risk strategies
• Risk limits

Effective Risk Governance – Tools and Tactics

• Improving ALCO effectiveness
• Best practice interest rate risk reports
• Best Practice Liquidity Risk Reports
• Contents of Best Practice Interest Rate Risk Policy
• Contents of Best Practice Liquidity Risk Policy
• Contents of Best Practice Liquidity Risk Contingency Plan
• Risk management oversight
• Role of internal audit in risk management

DAY 4

Overview of FTP, LFTP and RAROC

• Introduction to FTP
• Pricing goals
• Pricing for mismatch liquidity risk
• Pricing for contingent liquidity risk
• Introduction to Risk Adjusted Return on Capital

Basel III and Liquidity Regulation

• Global regulations
• Basel III Liquidity Coverage Ratio
• Basel III Net Stable Funding Ratio
• Basel III summary

• The course director is an author, and bank trainer specialising in risk management and ALM for financial institutions. Previously, he spent five years as a bank examiner and fifteen years in various bank management positions. 
  
  He is the author and co-author of numerous risk management and investment books. He is a frequent speaker at industry conferences and training programmes around the world and has been a member of the North American Asset / Liability Management Association since 1989.

  Courses run by this instructor

  • Liquidity Risk Measurement and Management

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

Liquidity Risk Measurement and Management

20-22 Nov 2013 (New York, United States)

This course is designed to increase participants’ understanding of the increasingly complex and sophisticated process of liquidity risk measurement and management exploring both its issues and challenges. The 2007- 2009 crisis has only accelerated the spread of “new” best practices. National and international regulators, including FSA and CEBS are adding more complexity. All delegates will receive comprehensive course documentation for use before and during the program. This will enable you to return to your organization with an extensive and valuable source of information for future reference.”

The New York Global Treasury Management Academy

9-12 Sep 2013 (New York, United States)

This course is for finance professionals with a mandate to obtain practical, leading edge ideas on how to transform their treasury into a world class operation. The course is also designed for commercial bankers with a critical requirement to better understand their client's world, to be able to walk the talk. Using worked examples and case study methodology, the attendees will learn how to apply best practice tools and techniques in all areas of global treasury management in order to improve control, mitigate risk, optimize asset utilization and reduce cost.

Treasury Risk Management

4-6 Nov 2013 (New York, United States)

Successfully managing risk within the Treasury function is an essential part of any organization’s overall risk management framework. The Euromoney Treasury Risk management course will cover treasury risk from both the corporate and bank perspective. It will provide insight into this important area with the main emphasis being on the financial risks arising from treasury activities.