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Workshop of Banks' Stress Testing
3 days of focused workshop training for the best Stress Testing Techniques
Stress Test is a risk management tool used to assess the vulnerability of Financial Institutions to exceptional events. It identifies the impact of extreme expected & unexpected shocks to a Bank’s capital, provides an assessment of its financial strength to withstand shocks and to spot emerging risk(s) & uncover weak spots in the financials. It enables Banks in identifying their vulnerabilities at an early stage.
The outcome of stress testing can be used to measure the amount of capital might be needed to absorb losses where and when the adverse outcomes occur. Stress testing helps financial institutions to monitor their different risks appetites and stress Testing should not be confused with a bank's forecast. Stress tests are performed for different types of risk including credit, market, liquidity and operational risk.
The course provides an overview of the principles and objectives of stress testing, different methodologies and techniques currently used for Stress Tastings. This course aims at giving participants the opportunity to learn and apply new techniques for stress testing. A large portion of the course incorporates stress testing process, modelling micro and macro-financial links; designing assumptions; running tests; and- summarizing and presenting the results.
Interactive lessons and analytical tools
Relevant and up-to-date content
Pre- course diagnostic test
Reference and support materials
At the end of the course, the trainee will:
Understand the concept of Stress Testing,
Understand the linkages between financial statements elements,
Identify different sources of baking risks,
Map changes in Macro/Micro variables onto bank financial Statements,
Report Stress Testing Outcomes,
Who Should Attend?
Officials working in banking supervision authorities, central banks, multilateral banks, Surveillance Divisions, Central Banks, State Banks, Multilateral Development Banks, Development Banks, Banks' International divisions, International Banking. Off-site Supervision, Onsite Supervision,
External and Internal Auditors,
Anyone who wants to learn the Stress Testing concepts and modeling techniques,
External and Internal Auditors,
Anyone who wants to learn the credit risk concepts and risk modeling techniques,
Graduate and undergraduate students in business, finance, accounting, banking and the other related disciplines who want to join banking sector.
Day 1- Stress-Testing Principles
Definition of stress-testing, Capital Stress Testing vs Liquidity Stress Testing,
Why applying stress-testing?, Stress-testing and Internal Capital Adequacy and Assessment Process (ICAAP), Supervisory Review and Evaluation Procedure (SREP), Basel Pillar 2 capital requirements and business planning, Crises Testing,
Who should apply Stress Testing? (internal, external supervisors, investors),
Stress Testing Approaches (bottom-up vs top-down),
Impact of credit risk on the bank’s balance sheet, income statement, cash flow statements, and equity prices
Lessons to be learned from the credit crunch
Day 2 - Building Blocks of Stress Test Models
Modelling of Financial Institutions’ Income Statements, the internal Relationships, Modelling of Loan Loss and other Provisioning,
Modelling and Linking of Financial Institutions’ balance sheet, income statement, cash flow and regulatory capital models
Performing Stress Test inside the bank, Loan Portfolio Stress Testing
Case Study: Setting up the linkages for a real case bank.
Modelling Loan Loss Provisioning (Non-performing loans, Loan loss provisioning, 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)
Day 3 - Performing Stress Test inside the bank, Loan Portfolio Stress Testing, (Continued)
Case Study: Loan loss provisioning for a real case bank
Loan Book Segmentation, retail portfolios vs corporate/SME portfolios
Case Study: Loan Book Segmentation for a real case bank
Performing Stress Test for Market Risk
Impact of Market risk on Financial Statements (FX open positions)
Case Study: FX open positions for a real case bank
Econometric techniques for stress testing
Performing Stress Test for Group of Banks in a Country
Put all scenarios together,
Linkage between Macroeconomic variables and bank-level variables,