Course Overview

This economics and finance course surveys developments in prudential risk regulation with emphasis on stress testing as the primary tool of regulation. This course will explain the motivations for changes to the capital accords from Basel I to Basel III.

Training DurationTotal Training Hours : 30 Hours
Training Duration : 1 Week
Total Training Days : 5 Working Days
Training SchedulesWeekdays (Sunday to Thursday)
Regular Sessions : 6 Hrs Per day (9am to 2pm or 3.00pm to 9.00 pm)
Food & refreshments Included

WeekEnds (Friday & Saturday)
Fast Track Sessions: 8 Hours per day (9am to 5pm)
Food & refreshments Included

1) Certificate from Laurels Training Institute, Attested by Knowledge & Human Development Authority (KHDA) government of Dubai, UAE - With Online Worldwide recognition facility

2) Certificate from American Institute of Professional Studies (AIPS) from USA (After 15 Days of course Completion which will couriered to the attendees office address) - With Online Worldwide recognition facility

Learning AidsYes
Course MaterialHard & Soft Copies of Study Material
Language of InstructionEnglish
Instructor HelplineYes
1. Email
2. Social Media (For Emergency requirements)
Registration Requirements1. Passport Copy
2. Curriculum Vitae
3. Passport size photographs
4. Course Fee
Mode of Payment:Cash / Cheque / Credit Card / Bank Transfer.
Eligibility Criteria
(Who should attend this training)

Stress testing staff at banks

Capital management staff

Treasury/ALCO staff


Risk management staff

Senior management

Bank supervisors and resolution authorities

Bank equity and credit analysts and portfolio managers
Course Benefits

Build a complete bank capital stress test model, encompassing both econometric and fundamental models of retail and corporate credit risk, market risk and operational risk

Learn how to apply the model for any of Internal Capital Adequacy Assessment Process (ICAAP), external supervisor-driven stress tests or investor-driven stress tests

Review the various approaches taken by different banks and supervisors in their capital stress testing, from a range of European, US and Asian banks

Course Contents / Outline

Stress-Testing Motivation And Applications

What is stress-testing – capital vs liquidity stress-testing?

Motivation for stress-testing – internal vs external supervisory and external investor purposes; business-as-usual vs stressed conditions; bottom-up vs top-down

Stress tests as a comprehensive and fully integrated, quantitative health assessment of banks as distinct from partial CAMEL-based approaches

Role of stress-testing in Internal Capital Adequacy and Assessment Process (ICAAP), Supervisory Review and Evaluation Procedure (SREP) and setting of Pillar 2 capital requirements, as well as in business planning

Banking system-wide stress tests, both in business-as-usual and stressed conditions. The increased role of external stress tests post crisis

Stress Test Model Building Blocks

Understanding and modelling pre-provision operating profits

Understanding loan loss and other asset provisioning

Understanding and modelling the balance sheet

Understanding and modelling regulatory capital

Linking the income statement, balance sheet and regulatory capital models


Loan Loss Provisioning

Non-performing exposure and forbearance loan definitions – threshold criteria; entry and exit; borrower group perimeter. Definitional differences across banks

Understanding loan losses – loan loss provisions, loan loss reserves, write-offs and recoveries

Loan loss provisioning under IAS 39 vs IFRS 9 – moving from an incurred loss model to an expected credit loss model


Performing The Capital Stress Test – Retail Lending

Stress scenario construction and choice of stressed capital threshold

Segmenting the loan book

Linking macroeconomic and bank-level variables. Peer benchmarking

Econometric techniques for stress testing

Stressing loan loss provisions for retail portfolios – residential mortgages

Stressing loan loss provisions for retail portfolios – consumer finance

Failed bank historical data – sanity check


Performing The Capital Stress Test – Corporate/SME Lending

Stressing loan loss provisions for corporate/SME portfolios

Stressing identified problem segments. Examples – commercial real estate (CRE); commodities

Failed bank historical data – sanity check


Performing The Capital Stress Test – Market Risk And Operational Risk

Stress testing market risk

Stress testing operational risk


Performing The Capital Stress Test – Completing The Test

Inputting stressed loan loss provisioning results into the stress test model

Interpretation and application of capital stress test results

Reverse stress tests


Stress Test Case Studies – Investor-Driven

Stress testing Chinese banks – Industrial & Commercial Bank of China Ltd; Bank of China Ltd; China Construction Bank Corporation; Agricultural Bank of China Ltd

Stress testing Standard Chartered Plc

Stress testing HSBC Holding Plc

Stress testing Banca Monte Dei Paschi di Siena SpA  "

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