Intensive Bank AnalysisFitch Learning
Intensive Bank Analysis
All available course dates
*With many businesses now working from home, we have introduced virtual learning so we can continue to deliver high quality training to the financial community as we accommodate this new way of working. Since 2003, Fitch Learning has been delivering virtual learning programs to clients and learners. Building on this extensive experience, we are now able to offer a range of public courses in a live online environment, whilst ensuring you will get the same value as you would in our classroom courses.
Intensive Bank Analysis
This course can be taken in a classroom environment or live online. Get in touch to find out more.
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.
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
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
- 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
This section covers how to measure and evaluate bank performance, distinguish strong and weak performance and appreciate the limitations of the figures.
- 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
- 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
- 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
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
*With many businesses now working from home, we have introduced virtual learning so we can continue to deliver high quality training to the financial community as we accommodate this new way of working. Since 2003, Fitch Learning has been delivering...
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