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FINANCIAL MARKET COURSES

Credit Risk - Lessons from Financial Crisis

The global financial crisis has become a defining event in history and will cast a long shadow over financial markets for many years to come. The crisis highlighted many issues, not least of which was some extraordinary mismanagement of credit risk.

 

This course describes the key mistakes made by banks and some other financial institutions, including too many concentration risks, a lack of understanding of products/risks, inadequate capital, funding and liquidity deficiencies, and issues with external credit ratings. The course also looks at the massive impact the crisis has had on banks’ business strategies, operating models, and credit risk appetite, in addition to the regulatory changes that have affected how banks manage credit risk.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Outline how both banks and regulators failed to understand or quantify the risks that were building up prior to the financial crisis

    Describe how banks’ business strategies and risk appetite have been refocused due to the events of the crisis and the introduction of tighter capital requirements under Basel III

  • COURSE OUTLINE

    Topic 1: Lessons from the Financial Crisis

    Before the Crisis

    Problems Emerge & Grow

    Key Issues

    o Concentration Risk

    • Examples

    • Commonalities

    o Lack of Understanding of Risks

    • Warehoused Assets

    • Implied Support for Securitizations

    • Derivatives Settlement Risks

    • Credit Migration

    • Asset Price Movements

    o Insufficient Capital

    o Funding & Liquidity

    o Credit Ratings

    Topic 2: impact of the Financial Crisis on Credit Risk Management

    Business Strategy

    Credit Risk Appetite

    Regulation

    o Regulatory Engagement

    Capital Adequacy Ratio (CAR)

    o Managing CAR

    Transparency & Disclosure

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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