Basel, Banks and Bank Regulation

The Third Basel Accord was issued in December 2017. It applies a global framework for banking regulation and was developed in stages (Basel III (original) plus Basel IV) prior to and in response to the 2008 financial crisis

Although “soft law”, the Accord nevertheless constitutes the global, regulatory standard on bank capital adequacy, stress testing and liquidity. Specifically designed to enhance bank and banking sector stability, the Accord materially impacts banking business models. It is therefore a given that people working in banks and financial institutions have an awareness of the content of the Accord and its implications for the business of banking.

The Third Basel Accord is being introduced into EU law through the Capital Requirements Regulations (CRR I and II) and the Capital Requirements Directives (CRD IV and V).

Our course starts with a brief overview of the background to bank prudential regulation to refresh participants knowledge of the key drivers behind the introduction and development of the Basel Accords

This is followed by:

• a high level overview of the structure of prudential regulation;
• a detailed examination of each of the main topic areas, these being capital, risk weighted assets, leverage and the liquidity standard;
• an interbank comparison of latest Pillar 3 metrics.

The course then considers the extra regulations applicable to global systemically important banks (G-SIBs). This will involve a review ofthe Financial Stability Board’s TLAC standard for globally systemically important banks (G-SIBs)

The final part of the course examines the rules applied by the EU Bank Recovery and Resolution Directive.

Whilst this course will contain some numerical examples and illustrations it will avoid becoming bogged down in the detailed mathematics of financial risk management. Although a technical overview the main aim of the course is to provide a clear line of sight through to the business implications for banks implementing and working within the regulatory framework of the Third Basel Accord.

Learning Objectives

• Minimize the learning curve for getting up to speed on Basel
• Gain an appreciation the major technical differences between the old and new rules
• Evaluate the significant impact of these differences through the use of real-world Pillar 3 disclosures
• Providing a framework for understanding how the Basel rules work in practice

Who Should Attend

• This course is designed for those who wish to learn about the Third Basel Accord and its impact on bank business models
• It will be highly relevant to finance and reporting and team members who will be involved in the implementation of the latest Accord and who will have to explain to others how it will impact the way a bank carries on its business
• The course is designed for executive officers, industry controllers, analysts, auditors and finance professionals who wish to gain a technical high-level understanding of these complex rules

Topics

• Introduction and development of the current Basel Accords
• An overview of how EU law (CRRs and CRDs) impacts HSBC
• The structure of the December 2017 Basel Accord
• Pillar 1, 2 and 3 overview
• Focus on the main technical areas:
• The regulatory boundary – how this differs from IFRS
• Components of bank capital
• Components of risk weighted assets (with focus on credit risk)
• The leverage ratio – the capital and exposure measures
• The liquidity standard
• Interbank comparison of capital adequacy metrics
• The FSB TLAC standard
• The EU MREL and recovery and resolution frameworks

Prerequisites

No advance preparation is required for this course although the following reading would provide a very good context to ease an understanding of the course content:

• Iain Martin - Making It Happen: Fred Goodwin, RBS and the men who blew up the British economy
• Michael Lewis – The Big Short (the movie is very good as well)