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Basel III - Executive Overview

Duration: 1 day
  • Background and Intentions of Basel III
  • Raising the Quality of the Capital Base
  • Revised Rules for Capital Coverage
  • The New Basel Liquidity Ratios
  • Supervisory Review, Stress Testing and ICAAP
  • Basel III Market Impact and Managerial Challenges
The objective of this seminar is to give you an overview of the updated Basel rules for capital adequacy and liquidity coverage in banks.

We start with a general introduction to the Basel framework and give an overview of the changes that have been agreed to strengthen resilience of the banking system in the wake of the global financial crisis.

We discuss how the quality, consistency, and transparency of the capital base will be raised and the risk coverage of the capital framework will be strengthened by reducing procyclicality, improving risk management, and by introducing a countercyclical capital buffer and a gross leverage back-stop.

We then give an overview of how various types of risk are measured under the Basel III and how these risk measures translate into capital charges. We illustrate with some simple examples.

Further, we explain the requirements under “pillars 2 +3” for stress testing, internal capital assessment and allocation, and risk disclosure, and we discuss the role of supervisors under the supervisory review process.

Finally, we discuss the practical challenges of implementing the (new) rules. We also look at the possible consequences of Basel III for the individual bank and for the banking system.

Day One

09.00 - 09.15  Welcome and Introduction

09.15 - 10.15  Background and Intentions of Basel III

  • The Crisis and the Need to Strengthen the Capital Framework
  • Raising the Quality of the Capital Base
  • Enhancing Risk Coverage
  • Reducing Procyclicality
  • Supplementing the Risk-Based Capital Requirement with a Leverage Ratio

10.30 - 12.00 Revised Rules for Capital Coverage

  • Updated Capital Definition
    • Tier 1 + Tier 2 capital
  • The Risk-Based Capital Ratio
    • New minimum requirements in relation to risk-weighted assets Non-Risk Based Leverage Ratio
  • Countercyclical Capital Buffers
    • The conservation buffer
  • Promoting Forward-Looking Provisioning
  • Treatment of Counterparty Risk and Securitization
  • Special Capital Charges for Systemically Important Institutions
  • Transition Arrangements
  • Practical Case Study: New vs. Old Capital Charges

12.00 - 13.00  Lunch

13.00 - 14.30  Measuring and Managing Liquidity Risk Under Basel III

  • The Current Supervisory Regimes for Liquidity Risk
    • Stock-based indicator angle
    • Mismatch indicator angle
  • The New Basel III Liquidity Ratios
    • Liquidity Coverage Ratio
    • Net Stable Funding Ratio
  • Case Study: Calculating the New Basel Liquidity Ratios for Sample Bank

14.45 - 15.30 Supervisory Review, Stress Testing and ICAAP

  • Overview of Changes in Basel III
    • The enhanced Supervisory Review Process and ICAAP
    • Enhanced disclosures and market discipline
  • Stress Testing
    • Basel III principles for sound stress testing practices and supervision

15.30 - 16.15 Managerial Challenges and Market Impact

  • How Will Basel III Impact Organization, Policies and Procedures?
  • How Will the Rules Affect Bank Profitability?
  • Integrating Basel III into an ERM Framework
  • Discussion: How will the updated Basel rules affect the banking and other markets?

16.15 - 16.30 Q+A, Summary, Evaluation and Termination of the Seminar