The Course provides participants with an overview of the advanced risk measurement and management systems banks employ to monitor credit risk. The learning event will address the estimation and calculation of the inputs into advanced credit risk measurement systems such as probability of default and loss-given default; portfolio management techniques; and the governance necessary to employ these advanced systems. The focus will include the basic methods supervisors can employ to understand and evaluate the effectiveness of banks’ implementation of these advanced credit risk management systems. Group work will take the form of a case study and give participants an opportunity to practice and reinforce the techniques discussed during the Course.

Objectives:  At the end of the Course, participants will be able to: (i) list the fundamental building blocks an institution must have in place before it begins developing more advanced models and techniques; (ii) describe what type and quality of data a bank needs to have; (iii) differentiate each of the advanced credit risk metrics and how they are derived; (iv) describe the basics of how to examine a bank's models; (v) relate the fundamentals of modern portfolio theory and its practical implementation; (vi) describe the basic portfolio management exam techniques; (vii) describe what the expectations of the board of directors are; (viii) describe what the expectations of the senior management team are; (ix) distinguished the roles of internal and external audit and the role of loan review, including how to examine these functions; and (x) relate the use of advanced credit metrics.

Resource Persons: The faculty of resource persons comprises instructors and technical experts from the Federal Reserve System.
 
Target Group: The Course is designed for middle to senior-level level officers with five or more years of experience with credit risk management. The purpose of the Course is to provide participants with an overview of advanced credit risk measurement and management techniques from an internal management and supervisory perspective. The Course provides supervisors with an introduction to the management and examination techniques used to evaluate the effectiveness of advanced risk measurement and management systems.