This course is devoted to the analysis of banking regulation, mainly the Solvency Regulation. In an environment of higher capital requirements the banking management is challenged to solve the optimal capital allocation on the several business lines. The knowledge about the regulatory view of risk and consequently the capital allocation, capital mitigation, and risk adjusted profitability will be the key to the bank management.
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Basel II: International Convergence of Capital of Capital Measurement and Capital Standards.
Basel III: A global regulatory framework for more resilient banks and banking systems.
Bank of Portugal notices and instructions. This includes the main notices that are 6/2010, 5/2007, 7/2007, 8/2007, 9/2007, 10/2007 and 3/2011 and other related regulation.
Regulation (UE) N.º 575/2013 of the European Parliament and of the council.
ENGELMANN, Bernd; RAUHMEIER, Robert (2011): The Basel II Risk Parameters: Estimation, Validation, and Stress Testing.
EBA Regulatory and Implementing Technical Standards related with CRR (Regulation (UE) N.º 575/2013).
BCBS – 2nd Consultative Document: Revisions to the Standardised Approach for Credit Risk.
ECB’s Draft guidance to Banks on non-performing loans.
BCBS – Consultative document – Review of the Credit Valuation Adjustment Risk Framework.
Operational Risk – Supervisory Guidelines for the Advanced Measurement Approaches.
Principles for the Sound Management of Operational Risk.
Delegated act on the liquidity coverage ratio.
Delegated act on the leverage ratio.
EBA’s Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP).
EBA’s Guidelines on ICAAP and ILAAP Information.
EBA’s EU-wide Stress Test.
Power point slides for the lectures. Exercises and case study will be presented in Excel. Additional readings will be provided during the course.
This course is delivered through class lectures. Lectures: there are 12 formal lectures in which relevant topics are presented, together with discussions on related case-studies.
The final exam is mandatory and must cover the entire span of the course. Its weight in the final grade can be between 30 to 70%. The remainder of the evaluation can consist of class participation, midterm exams, in class tests, etc. Overall, written in class assessment (final exam, midterm) must have a weight of at least 50%.
Final exam: 50% - 70%
Class participation (class exercises): 30%
Case study presentation: 20% - optional
-Historical view on Basel Accords the path of evolution in the regulatory view about risk management
-Concept of capital driven by risk
-Eligible Capital and Capital Requirements for each risk
-The regulatory view about other risks (Liquidity and Settlement risk, Interest rate risk, Exchange risk, Concentration risk, Information systems risk, Strategic risk, Compliance risk, Reputational risk, among others)
- The auto evaluation of economic capital
- The market view about activity risks and market communication
- Capital Requirements calculation process in the organizations: strengths and weakness
- The weaknesses of the capital regulation and the resolution mechanisms
- The European Banking Union architecture
Programs where the course is taught: