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FINANCIAL MARKET COURSES

Regulatory Environment

Courses In This Course

The global financial crisis catapulted the previously uninteresting topic of banking regulation into the mainstream media. The crisis demonstrated that banks’ stability affects not only the financial markets, but the broader real economy. Financial authorities around the world were forced to implement radical overhauls to regulatory regimes that had clearly failed. The United States was the first to act, with the passing of the Dodd-Frank Act bringing the most sweeping set of reforms to the regulatory landscape since the aftermath of the Great Depression. Other countries also introduced major reforms. The centerpiece of the global response was Basel III, which introduced significant changes to previous capital adequacy regimes as well as addressing issues such as liquidity and leverage.

Objectives

This course will provide staff at banks and other financial institutions with a solid grounding of the rapidly-changing regulatory environment in a post-financial crisis world. Topics covered in the course include:

The fundamental role played by banks in a modern economy and why this means they must be subject to tight regulation

The various tools available to regulatory authorities, from capital adequacy requirements and leverage rules to deposit insurance and lender of last resort facilities

The evolution of capital adequacy requirements, from the original Basel Capital Accord in 1988 to the 'three pillar's approach of Basel II and the most recent requirements set out by Basel III

Financial regulation in the world’s leading economies

The key provisions of MiFID, an EU Directive that provides for a comprehensive regulatory regime covering investment services and financial markets in Europe

The impact of the Dodd-Frank Act

Prerequisite Knowledge

Some understanding of the money, capital, foreign exchange, and derivatives markets would be useful.

Learner Profile

This course will provide staff at banks and other financial institutions with a solid grounding of the rapidly-changing regulatory environment in a post-financial crisis world.

  •    BANKING REGULATION - AN INTRODUCTION

    Overview

    The global financial crisis catapulted the previously uninteresting topic of banking regulation into the mainstream media. The crisis demonstrated that banks’ stability affects not only the financial markets, but the broader ‘real’ economy. Most market economies recognize the need for private shareholders to be compensated, but the stability of the system is paramount. Because of this, regulators often face a balancing act between these two objectives.

     

    This course examines how performing this balancing act throws up key questions that regulators must address. For instance, how can they best supplement capital adequacy requirements with specific rules covering key aspects of banking, such as liquidity and leverage? How should regulators deal with banks operating in multiple jurisdictions? Are the same regulations appropriate for all types of financial institution or do they need to be customized? These and other issues are considered in this course.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Financial Markets – An Introduction

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  •    BASEL II & BASEL 2.5

    Overview

    Regulatory capital requirements have evolved over time in an attempt to adequately guard against unexpected losses arising from various risks generated by financial institutions. From simple beginnings in the 1980s, the regulations have become ever more sophisticated in an attempt to capture the increasing subtleties of credit, market, and operational risk. Yet it would seem that such developments were insufficient to deal with an event on the scale of the global financial crisis.

     

    This course describes the concept of capital adequacy and how the Basel requirements in relation to this have progressed from the simplicity of the original Basel capital accord (Basel I) in 1988 to the more sophisticated requirements of Basel II and Basel 2.5. All three “pillars” are covered – the minimum capital requirements set out in Pillar 1, the Pillar 2 supervisory review process, and the disclosure requirements mandated by Pillar 3.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    BASEL III - AN INTRODUCTION

    Overview

    The financial crisis highlighted that the quantity and quality of bank capital was inadequate, despite the extensive changes introduced in Basel II. In addition, the crisis underlined the need for regulators to address not simply capital adequacy but also liquidity and leverage. This is what is being done through the development and implementation of Basel III.

     

    This course explains in detail how Basel III changes the nature of previous capital adequacy regimes. It also examines other areas addressed by Basel III, such as liquidity standards and leverage rules.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Basel II & Basel 2.5

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  •    BASEL III - CAPITAL

    Overview

    The financial crisis highlighted that both the quality and quantity of bank capital was insufficient to meet the losses that occurred. The size and nature of the losses, and the need to enlist government support to prevent bank failures, quickly galvanized the Basel Committee on Banking Supervision (BCBS) and the regulatory community to rethink the capital adequacy rules and minimum ratios (among other issues).

     

    This course describes the changes to the capital requirements under Basel III, including the tighter definition of qualifying capital and increased focus on CET1, the new capital buffers, and the revised minimum ratios. The impact of these changes on banks’ capital structures are explored, as are the implementation issues during the transition period.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Basel III – An Introduction

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  •    BASEL III - RISK COVERAGE

    Overview

    Trading losses during the financial crisis were larger than expected because risks were not recognized, were not measured accurately, or were understated. For instance, external credit ratings did not accurately reflect the underlying risks and there was undue reliance placed on these ratings by investors. There were also problems with capital calculation methodologies which did not take into account risks such as credit grade migration, loss of liquidity, and tail risks. Other issues included various incentives for regulatory arbitrage, significant procyclicality affects, and weaknesses with OTC trading.

     

    This course describes how the Basel Committee on Banking Supervision (BCBS) responded to these issues by updating and expanding risk coverage in a number of different areas.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Basel III – An Introduction

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  •    BASEL III - LIQUIDITY & LEVERAGE

    Overview

    The financial crisis highlighted the weaknesses in the liquidity management practices of banks and the lack of adequate oversight by regulators. A key contributory factor was the aggressive growth in bank balance sheets that was largely financed by increased wholesale funding rather that longer-term retail deposits or increased capital.

     

    In response to these issues, the Basel Committee on Banking Supervision (BCBS) introduced new measures as part of Basel III to address both liquidity risk and leverage. This course describes the Basel III liquidity and leverage ratios, details the implementation issues, and outlines the potential impact on banks.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Basel III - An Introduction

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  •    BASEL III - PILLAR 2 & PILLAR 3

    Overview

    The three pillars approach was introduced under Basel II to ensure that, in addition to specific capital requirements for credit, market, and operational risk (Pillar 1), there was a means to assess other risks and capital adequacy (Pillar 2) and to improve market discipline through increased disclosure (Pillar 3).

     

    Since the financial crisis, the BCBS has issued updated guidance on Pillar 2 and increased disclosure requirements under Pillar 3 to ensure there is more effective and consistent implementation by banks and regulators globally.

     

    The course explains the requirements of Pillars 2 and 3, details the changes introduced by the BCBS, and explains their impact and implementation issues.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Basel III – An Introduction

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  •    FINANCIAL AUTHORITIES (US)

    Overview

    Financial regulation in the US is a complex affair, with the various sectors of the financial markets regulated by numerous agencies and other entities. For many years, regulation was relatively loose, which yielded space for innovation and expansion in the banking sector. Banks took full advantage and profits soared. A number of institutions became ‘too big to fail’.

     

    The financial crisis brought the era of lax regulatory standards to a crashing halt. Banks, and their regulation (or lack of), became front page news. Gaps and weaknesses in the supervision and regulation of the financial industry were laid bare for all to see. The US government responded by introducing the most sweeping set of reforms to the regulatory landscape since the aftermath of the Great Depression.

     

    This course looks at the structure of the US regulatory environment and the role of the various key regulators. It also describes the massive changes that have come about as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    FINANCIAL AUTHORITIES (UK) - PRA & FCA

    Overview

    This course focuses on the microprudential regulation and supervision of the UK financial services industry. We examine the two microprudential regulators in terms of who they manage, their statutory objectives and the means by which they meet those objectives.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    FINANCIAL AUTHORITIES (UK) - BANK

       OF ENGLAND

    Overview

    The Bank of England is the central bank for the United Kingdom and has a wide range of responsibilities, similar to those of most central authorities worldwide. This course looks at the Bank’s two core duties – executing monetary policy by setting Bank Rate and (if necessary) buying financial assets through the asset purchase facility, and protecting and enhancing the resilience of the UK financial system as a whole.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    FINANCIAL AUTHORITIES (EUROPE)

    Overview

    The first decade or so of the euro was a resounding success, but the sovereign debt crisis that emerged in 2010 exposed some major cracks. The existence of a two-tier European economy became more apparent, with dire problems in peripheral countries standing in stark contrast to the performance of core economies. European governments and financial authorities, fresh from dealing with the financial crisis, now faced an even bigger problem as the very existence of the euro was threatened.

     

    This course looks at the key European financial authorities, including the role played by the European Central Bank (ECB) in implementing monetary policy for the entire euro area. The participants in the EU’s revamped supervisory framework, the European System of Financial Supervision (ESFS), are also described in detail. Finally, the course takes a look at some of the key EU financial markets directives, many of which were introduced or revised due to events in recent years.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    FINANCIAL AUTHORITIES (ASIA)

    Overview

    In the aftermath of the Asian financial crisis of the late 1990s, many Asian economies took advantage of improved global conditions to strengthen their economic and financial fundamentals. As a result, when the global financial and economic crisis erupted in 2007, Asian economies were well positioned to avoid its worst effects. The learning experience gleaned from the region’s own financial crisis nearly a decade earlier helped Asia emerge relatively unscathed. Notably, most banks in the region were not heavily exposed to distressed markets for structured credit products and other toxic securities. A number of institutions actually seized the opportunity to acquire assets at fire-sale prices. The expectation is that Basel III – the new global capital standards – is unlikely to be too onerous for most Asian banks due to their reasonable core capital buffers, modest reliance on hybrid capital, and generally good liquidity.

     

    This course describes the regulatory framework and the key financial authorities operating in four major Asian economies – Japan, China, Hong Kong, and Singapore.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    MARKETS IN FINANCIAL INSTRUMENTS

       DIRECTIVE (MIFID)

    Overview

    MiFID – the Markets in Financial Instruments Directive – is a key part of the European Commission’s Financial Services Action Plan (FSAP). It was introduced to replace the Investment Services Directive (ISD), the former regulatory cornerstone for European investment firms, and provides for a comprehensive regulatory regime covering investment services and financial markets in Europe.

     

    This course introduces the MiFID regulations, explains the key features of the Directive, and identifies the main market participants to whom MiFID applies.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    PRIMER – MIFID II/MIFIR

    Overview

    This video provides a high level overview of the MiFID II/MiFIR regime in Europe. It covers topics such as the reasons why regulators decided to overhaul the original MiFID directive, the key areas addressed by the new regime, the affected parties, and the implementation timeline.

    Course Duration

    9 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    DODD-FRANK ACT - AN OVERVIEW

    Overview

    In July 2010, the Dodd-Frank Act was signed into law by President Obama. Enacted in response to the financial crisis, it marked the greatest legislative change to US financial regulation since the 1930s. The Act consists of 16 titles that address issues as diverse as systemic risk, investor protection, consumer finance, OTC derivatives, proprietary trading, and insurance (among many, many other issues).

     

    This course begins with a brief overview of all sixteen titles of the Dodd-Frank Act. It then explores elements of the Act that impact the regulation of financial institutions, including new offices created, new capital requirements, and how the Act impacts credit rating agencies. The course also outlines elements of the Dodd-Frank Act that impact trading, including the Volcker rule, regulation of OTC derivatives, and regulation of asset-backed securitization.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Banking Regulation – An Introduction

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  •    FOREIGN ACCOUNT TAX COMPLIANCE ACT

       (FATCA)

    Overview

    The Foreign Account Tax Compliance Act (FATCA) is a controversial and unpopular piece of legislation, but the US government deems it necessary in order to ensure that its ability to determine the ownership of US assets in foreign accounts is not hindered. Through enhanced reporting requirements, FATCA is designed to combat tax evasion that the government believes is the result of the use of offshore accounts by US taxpayers.

     

    This course will provide you with a detailed overview of the Act, including two major elements of the legislation – the requirements that must be satisfied for foreign entities to avoid withholding taxes and the requirements that US taxpayers must satisfy.

    Course Duration

    60 mins

    Prerequisite Knowledge

    No prior knowledge is assumed

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  •    EUROPEAN MARKET INFRASTRUCTURE

       REGULATION (EMIR)

    Overview

    The European Market Infrastructure Regulation (EMIR) – the European Union’s framework for regulating the OTC derivatives market – is one of the most significant pieces of financial legislation in the EU’s history. Although it forms part of a global effort to regulate OTC derivatives following their role in the financial crisis, EMIR is arguably the most significant of all such regulations due to London’s prominence as a leading center for derivatives trading and the range of firms that EMIR applies to.

     

    EMIR imposes significant clearing, reporting, and risk mitigation obligations in relation to OTC derivatives transactions on a broad range of market participants. This course sets out the detail of these obligations and how they apply to these market participants.

    Course Duration

    75 mins

    Prerequisite Knowledge

    No prior knowledge is assumed.

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  •    UNDERTAKINGS FOR COLLECTIVE INVESTMENT

       IN TRANSFERABLE SECURITIES (UCITS)

    Overview

    In simple terms, UCITS are investment funds regulated at a European level. The broad aim of the UCITS regulatory regime is to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorization or “passport.”

     

    Since their introduction in the mid-1980s, UCITS have become a phenomenal success with well over 6 trillion euro in assets under management today. The UCITS brand is now considered to represent one of the highest standards in the fund management industry.

     

    This course describes the key provisions of the UCITS Directive and how it has evolved from the original UCITS Directive to the existing UCITS IV framework and the upcoming UCITS V (and UCITS VI) requirements. The course also looks at the main attractions of UCITS funds from the point of view of both investors and fund managers.

    Course Duration

    75 mins

    Prerequisite Knowledge

    No prior knowledge is assumed.

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  •    ALTERNATIVE INVESTMENT FUND MANAGERS

       DIRECTIVE (AIFMD)

    Overview

    The Alternative Investment Fund Managers Directive (AIFMD) was introduced in response to calls for greater regulation of hedge funds, private equity funds, and other alternative investment funds (AIFs). Driven by the events of the financial crisis and the Madoff investment fund scandal, the AIFMD represented the most radical reshaping of fund management regulation in Europe since the first UCITS directive in 1985.

     

    This course describes the main provisions of the AIFMD, including (among others) the requirements in relation to authorization, remuneration, risk management, liquidity management, securitization positions, valuation, delegation, and depositaries.

    Course Duration

    75 mins

    Prerequisite Knowledge

    No prior knowledge is assumed.

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