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Bank Risk Management

Bank Risk Management including Basel III and the ICAAP for Islamic Banks

This 3 day course is designed to help experienced delegates working in Islamic Banks deal with the final implementation of Basel II ­ in most cases this means completing an ICAAP- as well as the impact of Basel III as it rolls out between now and 2019. This is a course for Islamic Bankers who are familiar with A & L management in an Islamic bank or who understand the concepts. It is also aimed at risk managers who deal with corporate governance and/or regulatory reporting and will implement any changes that local regulators decide to adopt them. This is an intermediate/advanced level course

Learning objective

The main objective is to ensure delegates understand fully the implications of the regulatory environment especially the impact of Basel III on global markets as the current timetable unwinds


A workshop style course, with plenty of group discussions, case studies and classroom examples.

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The course is delivered in 10 sessions which are outlined below

Session 1: Introduction

  • Why regulate?
  • What is Capital Adequacy?
  • How does this impact an Islamic Bank?
  • Role of the BIS and the Basel Committee
  • History of the Basel Capital Accord
  • Basel II ­ an improvement
  • Basel III
  • Timeline for Basel III implementation

Session 2: The 3 Pillars

  • Why should an Islamic bank adopt Basel II?
  • The Structure of the Basel Accord
  • Pillar 1- measuring capital adequacy ­ what does this mean in practice
  • Minimum capital requirements under current market conditions. 14%?
  • Pillar 2 ­ supervisory review, the awakening of the regulators?
  • Pillar 3 ­ market discipline, embedded into an Islamic bank?
  • What does Basel II mean for an Islamic Bank?
  • What are the key challenges to implementation

Session 3: Measuring Credit Risk under Basel II

  • Credit Risk for an Islamic bank
  • Investor/Agency/Principal relationships
  • The different approaches under Basel II
  • Standardised Approach
  • Asset Classes, risk weights and issues with external credit ratings
  • IRB approach and internal rating systems
  • Differences between the Foundation and the Advanced IRB approaches
  • Definition and use of PD, LGD and EAD
  • Modelling techniques and approaches for PD,LGD and EAD
  • Credit risk mitigation under Basel II
  • Key challenges for implementation in an Islamic bank

Session 4: Measuring Operational Risk under Basel II

  • Operational Risk in an Islamic Bank
  • Introduction to Operational Risk and management techniques
  • Operational Risk ­ motivations and strategies
  • Basic Indicator Approach (BIA)
  • The Standardised Approach (TSA)
  • Alternative Standardised Approach (ASA) for retail and commercial business lines
  • Advanced Measurement Approach
  • Risk and control risk assessment (RCSA)
  • Methods and loss data collection
  • Key challenges for implementation in an Islamic bank

Session 5: Measuring Market Risk under Basel II

  • Market risk in an Islamic Bank
  • Market Risk Measurement Framework
  • Standardised measurement method
  • The internal models approach
  • Credit Risk in the trading book- measurement of Counter party Credit Risk
  • Key challenges for implementation in an Islamic bank

Session 6: Islamic Asset and Fund Management

  • The broad ranging implication of Basel II for the whole Islamic Bank business
  • Practical Application of Basel Pillar II and ICAAP
  • Application of Pillar 2 requirements, including stress testing and capital add-ons
  • Stress tests and scenario tests
  • Best Practise implementation of stress testing
  • What is required from the Internal Capital Adequacy Assessment Process ( ICAAP)
  • Development of an effective ICAAP Framework in Islamic banking
  • The importance of consideration of all risks under ICAAP
  • Measurement of risk appetite
  • Developing ICAAP Documentation
  • Key challenges for implementation in an Islamic bank

Session 7: Basel II ­ Motivation and introduction

  • Why Basel III
  • Too much concentration on capital and Liquidity?
  • What are the implications for Islamic Banks
  • Overview of the new Basel III regulations
  • Improving the capital base- Flaws in definition of Capital
  • Types and Criteria for Core Capital, tier 1 Capital and tier 2 Capital
  • Does this change much for Islamic Banks?
  • Key challenges for implementation in an Islamic bank

Session 8: Basel III ­ Main areas of enhancement

  • Enhanced Risk coverage
  • Enhanced requirements for Counter party Credit Risk
  • Addressing reliance on external ratings
  • The leverage ratio, and key elements for calculation
  • Reducing procyclicality
  • Treatment of systemic risk
  • Key challenges for implementation in an Islamic bank

Session 9: Basel III - A new framework for management of Liquidity Risk

  • The major challenge in an Islamic bank?
  • The Liquidity Coverage Ratio (LCR)
  • The Net Stable Funding Ratio (NSF)
  • Review of regulatory documentation, BIS releases and G20 agreements
  • Timeline for international adoption
  • Key challenges for implementation in an Islamic bank

Session 10: Basel II ­ Impact and where next

  • The impact on Islamic Banking
  • The Impact on the banking sector
  • What next for Capital regulation
  • Key challenges for implementation in an Islamic bank

Session 5: Basel and Islamic Finance

Case Study: What are the key issues faced by Islamic institutions in implementing the Basel Accord?  How can these be overcome?

About Us

Learning through action - every program we deliver is highly practical and addresses real live issues.  We use simulations, exercises and case studies and all our methods are based on the latest neuroscience and positive psychology research findings.  Everything we deliver and challenge our participants to think about leads back to one simple question ­ “what am I going to do differently back at work and how?”.

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United Kingdom

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