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This course surveys developments in the area of prudential risk regulation with particular emphasis on stress testing as the primary tool of regulation. The practical aspects of conducting CCAR/DFAST tests in the US are covered. The impact of the financial (subprime) crisis of 2007/8 on regulatory reform and the consequences for financial intermediaries are also reviewed.
This course is a component of the Risk Management Professional Certificate.
- Basic MS Excel skills
- Basic probability and statistics
- Basic knowledge of financial securities and markets
MODULE 1: RISK REGULATION
- Why regulation?
- Systemic Risk
- A brief history of regulation
- Impact of the subprime crisis on regulation
MODULE 2: THE BANK CAPITAL DEBATE
- What is capital?
- Regulatory capital
- Economic capital
- Risk capital: The Merton-Perold approach
- Bankers vs. academics: The role of incentives
MODULE 3: THE BASEL CAPITAL ACCORDS
- Basel I
- 1988 BIS Accord
- Cooke ratio
- 1996 Amendment
- Basel II and Solvency II
- Three pillars of Basel II
- Credit risk capital under Basel II
- Basel 2.5, Basel III and Dodd-Frank
MODULE 4: OVERVIEW OF REGULATORY REGIMES
- US Federal and State regulators
- Financial regulation in the United Kingdom, European Union and Asia
- Regulation in emerging economies
WHAT YOU'LL LEARN
- Describe the rationale for risk regulation
- Explain the motivations for changes to the BIS capital accords from Basel I to Basel III
- Demonstrate knowledge of the most significant trends and reforms in the development of risk regimes in the US, UK, and EU
- Understand the critiques of prudential risk regulation
- Understand the framework of regulatory stress testing in the US and other jurisdictions
Who should attend
- Risk managers and assistants
- trading assistants
- finance professionals
- auditors and controllers