17 18 November 2014 | Mvenpick Hotel Karachi | 9:00 am to 5:00 pm

BASEL III AND TREATMENT OF

COUNTERPARTY CREDIT RISK

Clive Corcoran

FCA Registered Investment Adviser,

Financial trainer and Author

STRUCTURE OF THE COURSE

The two day course will consist of four sessions of ninety
minutes duration with coffee breaks in the morning and
afternoon and with a lunch break in the middle of the day.

BASEL III AND TREATMENT OF

COUNTERPARTY CREDIT RISK
AGENDA DAY-1

COFFEE BREAK

SESSION ONE

SESSION FOUR

Introductory Background to Basel III

Background to banking regulation and national banking
regulators
Original Basel Accord (1988) and purposes / weaknesses
Distinction between the Banking Book / Trading Book
Basel II background and purposes
Definitions of capital and return on equity, capital ratios, RWA
Market risk, Credit risk, Operational risk, Liquidity risk
The Three Pillars approach
Capital Rules under Basel II
Risk management and disclosure under Basel II
Basel Committees response to the financial crisis
New initiatives in Basel 2.5
Recognized need for liquidity standards and ratios
stable funding

Impact of Basel III

How will Basel III affect a banks business model?
Funding issues use of repo, interbank, deposits
Capital issues shortage of capital concerns
Hybrid capital issues Contingent Convertibles (CoCos)
and others
Impact on Return on Equity
Impact on lending businesses and trading businesses
Treatment of securitisation and re-securitization
Implications for SIFIs and G-SIBs
Will it change how banks are structured and managed?
Greater emphasis on role of central clearing parties (CCPs)
Implementation in US and EU - regulatory arbitrage possibilities

COFFEE BREAK
SESSION TWO
Overview of what is new in the Basel III Proposals
What are the fundamental new proposals under Basel III?
Revisions to minimum capital standards
Ratios between regulatory capital tiers
Capital Conservation buffer
New Liquidity framework short term and longer term
Treatment of Systemically Important Financial Institutions
(SIFIs)
Counter cyclical buffer
Leverage ratio back stop for capital charge for total non
RWA assets
Counter acting the regulatory arbitrage between trading
book/banking book
Increased focus on counter-party credit risk - CVA
Time Table for Basel III
What is the likely implementation time scale?
How will implementation be phased in?
What about firms which are not yet Basel II compliant?

Case Study
Examination of features of hybrid capital instruments

AGENDA DAY-2
SESSION ONE
Drivers of Counter-party Risk (CCR)
Separating market risk impact on trading positions from CCR
Pricing counterparty risk use of spreads, ratings
Probability of Default (PD) estimation of PD and Exposure
at Default (EAD)
Expected positive exposure (EPE)
Loss Given Default (LGD) and recovery rates
Counterparty risk in credit default swaps
Counterparty risk in interest rate swaps
Experience of AIG and mono-lines insurance companies
in financial crisis
The role of a central clearing house
Stress analysis and randomized stress scenarios
Market factors which drive counter-party credit deterioration
Case Study
Assessing counterparty risk and credit migrations with
Monte Carlo simulations

LUNCH BREAK

COFFEE BREAK

SESSION THREE

SESSION TWO

Basel III in More Details

Definitions of Regulatory Capital Tier 1, 2 and 3
Amount of capital increased base requirements,
stricter definition
Liquidity ratios the LCR, what are HQLA, Net Stable Funding
Ratio (NSFR)
Assessing counter-party risk CVA, DVA, collateralization
Wrong Way Risk
Pillar II issues
Capital modelling and planning
Pillar III issues
Greater risk disclosure
Transparency
To what extent do these go beyond Basel II?

Credit Value adjustment (CVA) and collateral

Definition Credit value adjustment (CVA)
Pricing formula for CVA John Hulls approach
Defining credit exposure in relation to market risk impact
on derivatives
Expected positive exposure and worst case exposure
Nature of collateralization ISDA treatment
Benefits of effective collateral management
Impact of netting on CVA
Impact of collateral on CVA
Hedging and credit default swaps
Eligible hedging instruments no nth to default structures
Bilateral counterparty risk and collateral
Over-collateralized positions and risk of counterparty default

Case Study
Stressed VaR Excel model to explain Expected Shortfall

Case Study
How effective collateralization strategies offset CVA in credit
exposure

BASEL III AND TREATMENT OF

COUNTERPARTY CREDIT RISK
LUNCH BREAK
SESSION THREE
Correlation factors, DVA and Wrong Way Risk
Basel III focus on correlation risk between counter parties
Linkages in market factors impacting portfolio values
Cross-sectional market correlations and liquidity risks
Definition of Wrong Way Risk (WWR)
Treatment of WWR in Basel III
Examples of counter-party arrangements where WWR is present
What is Debit Value Adjustment (DVA)?
Examples of DVA deterioration of credit spreads for banks,
swap dealers
Basel Committee approach to DVA
How does DVA offset CVA?
Effective EPE with stressed parameters to address general
wrong-way risk
John Hulls treatment of Wrong Way Risk
COFFEE BREAK
SESSION FOUR
Basel III Focus on Moving Away from OTC Clearing
Basel III treatment of OTC clearing versus CCP clearing
Different capital charges for OTC and CCP
Examination of traditional role of CCPs
Novation as replacement for original OTC bilateral agreements
Nature of Swap Execution Facilities (SEFs)
Role of Chicago Mercantile Exchange (CME) in swap clearing
Emphasis on CCPs in Dodd Frank
How margin works in CCPs initial margin and variation margin
Comparison of collateral requirements for OTC versus CCPs
Forecast that in future clearing will be 75% via CCPs 25%
via OTC
Inter-operability across CCPs overall margin requirements
How safe are CCPs
Case Study
Excel spreadsheet model for explanation of initial margin
and variation margin in CCP clearing

WHO SHOULD ATTEND

The course is aimed at those working in liquidity management
within banks and other financial institutions. Specific job titles
may include but are not limited to:
Directors, VPs, Division Heads, GMs, Specialists and
Senior Managers of:
Credit and Risk Management
Credit Control
Finance
Audit & Compliance
Portfolio Management
Risk Analysis & Controlling
Treasury
Basel II Reporting
Basel III Reporting
Asset and Liability Management
Regulatory

About

Clive Corcoran

FCA Registered Investment Adviser, Financial Trainer and Author

Clive Corcoran is an FCA registered

investment adviser, financial trainer

and author. During the past five years
he has been primarily engaged in
executive education on a global basis
for finance professionals. He has
conducted workshops on a variety of
topics including risk management, asset
allocation techniques and trading strategies (especially
with regard to the FX market). The clients for whom he
has recently provided in house training have included the
Saudi Investment Bank in Riyadh, a central bank in North
Africa, a sovereign wealth fund in the Gulf, an asset
management company in Beijing, a global banking group
domiciled in the Netherlands, a central bank in South
America, a public/private partnership in project finance
based in Washington D.C. and the European Investment
Bank (EIB).
In his earlier career he was co-founder and CEO of a business
management company with offices in the USA, UK, Canada
and Germany. Based in the USA during the 1980s and 90s
his responsibilities included asset management,
international tax planning, fiduciary responsibilities and
providing strategic financial advice to high net worth
individuals. Since re-locating to the UK in 2000, he has
continued to be engaged in providing wealth management
services to private clients and pension funds.
As an author he has written several titles on finance and
investment management. His most recent book entitled
Systemic Liquidity Risk and Bipolar Markets was published
by Wiley Finance in February 2013, and looks at new
challenges facing asset allocators and risk managers in the
post financial crisis environment. An earlier book entitled
Long/Short Market Dynamics: Trading Strategies for
Todays Markets (Wiley, 2007) dealt primarily with
alternative asset management strategies. He was also
commissioned by the London based Chartered Institute
for Securities and Investment (CISI), to write three
textbooks, Securities (Level 4) for those seeking the
Investment Advice Diploma, and Financial Markets, and
Portfolio Construction Theory and Wealth Management,
which are foundation items for those seeking the Masters
qualification from the CISI.
In 2013 he developed a distance learning course on the
Mechanics of Risk Management which is now up and
running and leads to a Post Graduate Certificate (PGC)
awarded by Middlesex University in London, and he is now
completing the process for a similar PGC on The Mechanics
of Financial Derivatives as well as a fully-fledged Online
MBA in Banking & Finance for the same university.
He has also been a regular analyst/contributor to CNBC
Europe and other broadcast outlets, a columnist for several
print and online publications, and has been a featured
speaker at international investment and trading expos.

BASEL III AND TREATMENT OF

COUNTERPARTY CREDIT RISK
Is Basel III the answer?
These questions are yet to be answered but Basel III is gradually rolling out as planned...
It is no secret that regulation has been scrutinised heavily in light of the credit crisis. The collapse of
Lehmans, the credit crunch and ongoing financial crises such as euro zone sovereign debt, have prompted
a radical overhaul of global banking regulation by the Basel Committee on Banking Supervision (BCBS).
These reforms recently announced are known generally as Basel III and are extensions of the previous
Basel Accord (1988) and the more recent Basel II (2007). Collectively, they will have a major effect on the
way banks structure themselves and their businesses, as well as the way they measure and manage risk.
It is crucial to stay abreast of these proposed changes in order to be prepared for what the future holds.
In this course we will look at the development of the Basel Accords and specifically the proposed changes
under Basel III. We will look at how these changes will affect current practices and the organisation of
business and its controls. This course will emphasise the practical impacts of the Basel III proposals and
consider how these can be best implemented.

Why this course is timely

There is no doubt these changes will have a dramatic impact on you and your business and the only way
to make sure that you continue to succeed despite of them, is to stay informed and be prepared. Book
on this course now and make sure you are fully equipped when the time comes!

Registration Details

Another Course by Clive

Corcoran

Regular Tuition Fee: Rs. 89,000 per participant

*Group Discount: 15% Discount
on 2 or more nominations from the same organization
Includes courseware, certificate, lunch, refreshments and business networking.

For registration(s), send us your

Name, Designation, Organization, Mobile, E-Mail and Postal Address
to register@terrabizgroup.com
For further information please contact
Talha Shabbir at +92 321 8747 595 and +92 333 0200 333
Phones: +92 21 3455 0319 & 3455 8539 Facsimile: +92 21 3455 7264
Strictly limited seating to ensure value added to all Participants - so book early!
Comprehensive course materials will be provided.
Terrabiz Cancellation Policy: For cancellations made in the 7 working days to the workshop,
no refunds will be given. Cancellations must be confirmed by email. Substitutions may be made at any time.

Attend both the Course

s and Avail

Special Discount!

For details please write

us
info@terrabizgroup.comat