Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks. The key changes include:
- A revised standardised approach for Credit Risk
- Revisions to the internal ratings-based approach for Credit Risk, limiting the use of advanced internally modelled approaches for low-default portfolios
- Revisions to the credit valuation adjustment (CVA) framework, including the removal of the internally modelled approach and the introduction of a revised Standardised approach
- A revised Standardised approach for Operational Risk, which will replace the existing Standardised approaches and the advanced measurement approaches
- Revisions to the measurement of the leverage ratio and a leverage ratio buffer for global systemically important banks (G-SIBs), which will take the form of a Tier 1 capital buffer set at 50% of a G-SIB's risk-weighted capital buffer
- An aggregate output floor, which will ensure that banks' risk-weighted assets (RWAs) generated by internal models are no lower than 72.5% of RWAs as calculated by the Basel III framework's Standardised approaches. Banks will also be required to disclose their RWAs based on these Standardised approaches.
The course will also cover how to effectively undertake the Supervisory Review and Evaluation Process (SREP), that forms part of the Pillar 2 Supervisory evaluation process, and which then feeds into the supervisory strategy and setting of capital levels, buffers and add-ons. It will cover the overall framework of SREP as undertaken by international and regional regulators including the Bank of England and the European Central Bank.
To be able to understand the key changes that Basel III introduces and how Supervisors should monitor and evaluate them. In addition, Supervisors will learn how to undertake a SREP, review an ICAAP document and properly identify, understand, and objectively measure risks within a bank including credit, market, and operational risks.
The course targets bank supervisors and other central bank personnel who have at least two years supervisory experience and have had some involvement in assessing risks within banks.