FINANCIAL MARKET COURSES
Japanese Equity Market
Receivable Finance (New)
Lending - An Introduction
The Lending Cycle
Commodities - An Introduction (Revised)
Commodities - Trading (New)
Commodities - Livestock (New)
Commodities - Softs (New)
Primer – MiFID II/MiFIR (New)
Understanding Private Wealth Management Business
Private Wealth Management Products & Services
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Introduction to Credit Risk
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, Introduction to Credit Risk, is the first in 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.
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 - AN INTRODUCTION
Despite all the innovation and complexity of recent decades, the fundamental business of banks remains the lending of money. The major risk is that of default when the money does not get repaid by customers.
This course outlines how credit risk is generated by the business of financial institutions, as well as the structures these institutions should have in place to manage this risk. It describes in detail the entire credit risk lifecycle, from risk assessment through to ongoing risk reporting and monitoring. The course also explains why it is important for banks to look beyond credit risk and take into account other risks such as market and operational risk when making credit decisions.
CPE Credits: 1
Author: Carl Olsson
Field of Study: Economics
Creation Date: July 10, 2015
Expiry Date: July 10, 2017
No prior knowledge is assumed for this course.
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CREDIT RISK - TYPES
Banks must have appropriate risk management frameworks and personnel in place to deal with many different types of credit risk. This course describes these different risk types and the characteristics that determine whether a particular credit risk falls into one risk type or another. It goes beyond the credit risks that arise in the traditional banking book to examine those that arise in the trading book and the regulatory and risk management implications of this distinction. The course also describes in detail how banks segment different customer types and why this differentiation matters from a credit risk point of view.
Credit Risk – An Introduction
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CREDIT RISK - MEASUREMENT & CAPITAL
The financial crisis demonstrated that banks, as well as some nonbank financial institutions such as insurance companies, did not fully understand the size and nature of the risks that they were exposed to. While accurate measurement of credit risk is a non-trivial task, the conceptual framework itself is fairly intuitive. There are three critical parameters in determining the level of credit risk – exposure at default (EAD), probability of default (PD), and loss given default (LGD).
This course describes these parameters and how they are used to calculate the expected loss (EL) of a credit portfolio. EAD, PD, and LGD are also the main factors in determining regulatory capital requirements for credit risk under Basel III. The course outlines how capital requirements are based around the concept of unexpected loss (UL), which is a function of EL for a credit portfolio.
Credit Risk – Types
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CREDIT RISK - LESSONS FROM THE FINANCIAL
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.
Credit Risk – Measurement & Capital Requirements
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