INTRODUCTION

After the global financial crisis, a bank's Treasury department faces greater challenges than ever. Optimization of assets and liabilities is essential in reducing the "impact" that the regulation represents on Return on Equity as a result of the regulation that followed the crisis, particularly Basel III. This in-depth, 10-day asset and liability management program aims to teach the core function of the ALM function as well as how the function seeks to maximize balance sheet performance through the more selective allocation of balance sheet resources. Additionally, it will highlight what the industry views as effective practices for coping with the shifting regulatory environment in which ALM operates and examine.
Delegates will therefore be better prepared to work in or with the ALM department and support the optimization of the balance sheet they are charged with achieving by attending the day training

COURSE OBJECTIVES

Participants should be able to:

• Describe the function of the ALM function inside a bank by the end of the course.
• Describe the causes, effects, and motivation for the regulations that have followed the global financial crisis, as well as how they have affected the ALM function.
• Describe how the regulation has affected the bank's balance sheet, in particular the capital and liquidity resources.
• Understand how the ALM function helps to optimize the balance sheet by preserving capital or maximizing margins through a more selective approach to assets issued and funding raised.
• Identify the obstacles that Basel IV's prospective implementation could pose, especially for the ALM function.
• Determine how the larger business may assist the ALM function in overcoming these obstacles, for example, through communication and the alignment of business incentivization

DURATION

10 Days

WHO SHOULD ATTEND

• Group Treasurers
• Chief Risk Officers
• Accounting and Finance Managers
• Asset Managers
• Liquidity Managers
• Risk Managers and Risk Controllers
• Risk Officers
• Auditors and Bank Regulators

COURSE CONTENT

Introduction

Session 1: The evolving role of Asset and Liability Management [ALM]

• Defining the role of ALM 
• Recap on the Global Financial Crisis
• What caused it?
• What resolved it?
• What where the lessons learnt?
• How has it impacted ALM functions

Session 2: Linking Asset and Liability Optimisation to Return on Equity

• Impact of Basel III on Capital
• The risk constraint ratio
• The leverage ratio
• Recap on the Standardised Methodology for Credit Risk
• Credit Conversion Factors
• Adjusting for Collateral
• Gearing - Linking asset and liability pricing to returns on capital
• So what does this mean for ALM and ultimately strategy?

Session 3: Optimising Assets - Internal Rating Based (IRB) approach for Credit Risk

• Incentives for adopting IRB – more complexity less capital
• Foundation IRB (FIRB) compared to Advanced IRB (AIRB)
• Constructing the IRB equation for wholesale 
• Constructing the IRB equation for retail
• Adjusting IRB for calculation of Economic Capital

Session 4: Traded Market Risk

• Sources of Market Risk 
• Evolution of Market Risk Regulation 
• Measuring Market Risk using Regulatory VaR and Stressed VaR
• Limitations of Basel II.5 and overview and Fundamental Review of the Trading Book [FRTB]

Interest Rate and Liquidity Risk

Session 5: Asset and Liability Gap Analysis

• Challenges of Maturity Transformation
• Selecting appropriate time buckets
• Distribution of maturing and non maturing assets and liabilities
• Introduction to behavioural modelling 
• Adjusting for prepayment and redemption 

Session 6: Non-Traded Market Risk - Overview of IRRBB

• What is IRRBB and what are the sources of it
• Comparing IRRBB to CSRBB
• Measuring IRRBB
• Economic Value of Equity [EVE} vs Earnings at Risk [EAR]
• Review of BIS 368 ‘Final’ Standards for IRRBB
• Treatment of cash flows
• Time bucketing of cash flows
• Discounting of cash flows
• Stressing of cash flows

Session 7: Liquidity Risk

• Typical Liquidity Metrics
• Evolution of Liquidity Regulation
• Basel III Liquidity Regime
• Liquidity Coverage Ratio [LCR]
• Net Stable Funding Ration [NSFR]
• How they work in harmony 
• So what does this mean for ALM and ultimately strategy and liquidity preferences?

Session 8: Beyond Pillar I

• Overview of the Individual Capital Adequacy Assessment Process [ICAAP]
• Overview of the Individual Liquidity Adequacy Assessment Process [ILAAP]
• What stress is appropriate – what qualifies as ‘severe but plausible’
• Harmonising ICAAP and ILAAP
• Effective Recovery and Resolution Planning [RRP]

Internal Risk Management - Role of Funds Transfer Pricing [FTP]

Session 9: Evolution of FTP and its role in managing Non Wholesale Portfolios

• Challenges in Non Wholesale Portfolio Management
• Defining FTP
• What is it?
• Why have it?
• Why is it essential in optimizing portfolios
• Evolution of FTP methodologies
• Zero cost curve
• Average cost curve
• Maturity matched curve
• The regulatory view

Session 10: Deriving the FTP Curve

• Market sources and proxies
• Secondary Trading
• CDS
• Peer spreads
• Challenges of deriving the curve in an under developed wholesale envrionment
• Use of basis and cross currency swaps
• Ownership and governance

Session 11: Operating FTP

• ‘Behaviouralising’ Portfolios
• Methodologies
• Ownership and governance
• Including in management reporting – stock/flow rate blending
• Driving behaviours 
• Aligning business incentivisation
• Tools/Products to optimise

Session 12: Pricing with FTP

• Pricing flow business
• Pricing ‘cushions’/buffers
• Reflecting regulation in FTP e.g. impact of LCR
• Trends and trajectories in FTP methodologies – inclusion of capital in a FTP mechanism

External Risk Management – Role of FX and IR Hedging Products
Session 13:Tools for Managing FX and IR Risk

• Recap on Cash FX instruments
• Spot
• Forwards
• Swaps
• Deriving Forwards rates and their applications
• Using FX swaps to optimize funding
• Interest Rate Swaps [IRS] defined
• Types of IRS and their application
• Fixed for Floating IRS [coupon swaps]
• Floating for Floating IRS [basis swaps]
• Pricing and valuation of IRS

Session 14: Applications of Cross Currency Swaps [XCCY] in managing FX and IR risk

• XCCY swaps defined
• Application of XCCY swaps
• Long term FX risk management
• Synthetic funding efficiency
• Pricing and valuation of XCCY swaps

Session 15: Structural Hedging

• Best practice in Structural Hedging
• What to hedge
• When to hedge
• How much to hedge
• Governance and review– keeping the structural hedge appropriate
• Distributing the cost of unwind

Session 16: Future Challenges for ALM and wrap up

• Total Loss Absorbing Capacity [TLAC]/Minimum Requirement for Eligible Liabilities [MREL]
• Overview of Basel IV – focus on consistency
• What does this mean for ALM?

GENERAL NOTES

• Our seasoned instructors, who have years of experience as seasoned professionals in their respective fields of work, will be teaching this course. A combination of practical exercises, theory, group projects, and case studies are used to teach the course.
• The participants receive training manuals and supplementary reading materials.
• Participants who complete this course successfully will receive a certificate.
• We can also create a course specifically for your organization to match your needs. To learn more, get in touch with us at training@dealsontrainers.org.
• The training will take place at DEALSON TRAINERS IN NAIROBI, KENYA in Nairobi, Kenya.
• The training fee includes lunch, course materials, and lodging for the training session. Upon request, we may arrange for our participants' lodging and transportation to the airport.
• Payment must be made to our bank account before the training begins, and documentation of payment should be emailed to training@dealsontrainers.org