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FINANCIAL MARKET COURSES

Credit Risk Appetite

Courses In This Course

The global financial crisis highlighted many issues, not least of which was some extraordinary mismanagement of credit risk. Post-crisis reviews pointed to a major breakdown in loan underwriting standards and indicated that far too much lending prior to the crisis was either irresponsible or not very prudent. As events proved, banks and other financial institutions can lose billions, or even go out of business, due to their failure to manage credit risk properly.

 

This course, Credit Risk Appetite, is part of a series of courses that are designed for financial market professionals looking to better understand and manage credit risk in a post-crisis world. Rather than focusing on how to perform credit analysis, the series adopts a “top-down” view of credit risk and its management, covering many areas that are not currently well articulated. While financial analysis has a role, well-trained bankers need to understand much more than financial statements and ratios in order to determine the ability of borrowers and counterparties to repay their obligations.

Learner Profile

This series of courses is aimed primarily at those working in a commercial/wholesale credit environment where risk assessment and credit approval is based on objective and subjective analysis and experience. However, much of the material is sufficiently generic to be relevant to retail/consumer/SME banking institutions as well.

  •    CREDIT RISK APPETITE - AN INTRODUCTION

    Overview

    Credit risk appetite is the level of risk that a bank is prepared to accept to achieve its objectives. It is important for banks to set risk appetite at an appropriate level to ensure credit risks are only accepted and managed within that appetite. Appetite must be reviewed and reset in light of changing market conditions and portfolio performance. This course describes the importance of setting credit risk appetite, the various measures of risk appetite, and the impact of risk appetite on credit decisions.

     

    The financial crisis highlighted the importance of understanding and managing concentration risks. Frameworks for identifying and managing concentration risks have been refocused due to the events of the financial crisis. This course outlines the key concentration risks faced by banks.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Risk Management – Strategic & Business Unit Management

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  •    CREDIT RISK APPETITE - CUSTOMER &

       INDUSTRY RISK

    Overview

    Credit risk appetite varies considerably by customer type. Credit extended to a customer must comply with the lender’s credit risk appetite – proposals outside appetite may be approved, but only exceptionally.

     

    Banks also need to manage industry risk – the risk that companies in a particular industry will be negatively impacted by various internal and external factors.

     

    This course looks at how banks identify, manage, and mitigate both customer and industry risk.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Risk Appetite – An Introduction

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  •    CREDIT RISK APPETITE - PRODUCT & COUNTRY

       RISK

    Overview

    Every product gives rise to a different combination of risks, although not all create credit risk. Key product risks must be identified, quantified where possible, and accepted, mitigated, or avoided. This course discusses the importance of understanding and managing product risk. It describes the various factors that determine whether a particular product is considered high or low risk and some of the approaches banks use for setting and managing product risk appetite.

     

    Managing country risk is a challenging task for banks. It is important to be able to identify country risks both effectively and efficiently when processing transactions and assessing credit proposals. Failure to do so can lead to banks accepting risks outside appetite. It can also slow down processing and lead to a loss of business. This course explores the issues surrounding the identification of country risk, describing the methods used by banks to ensure country risks are identified and managed effectively and risk appetite is not exceeded.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Credit Risk Appetite – Customer & Industry Risk

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