Economic Capital, Fund Transfer Pricing and RAROC

Monday, December 4

09.00 - 09.15 Welcome and Introduction

09.15 - 12.30

Benefits, Foundations and Implementation

  • The competing management frameworks
  • The five benefits of Economic Capital (ECAP)
  • The seven founding guidelines and their challenges
  • How to implement an ECAP framework
  • ECAP and ICAAP (pillar 2)
  • Exercises and Q&A

Methodology - part 1

  • Common methodological principles for measuring ECAP
  • Risk capital and ECAP
  • Measuring Credit risk capital

12.30 - 13.30 Lunch

13.30 - 16.30

Methodology - part 2

  • Measuring Market Risk capital
  • Measuring Operating Risk capital
  • Consolidating Risk capital measures into ECAP

Results Analysis and Organization

  • Linking risk profiles and business models
  • Organization and IT for a successful ECAP framework
  • Exercises and Q&A

Tuesday, December 5

09.00 - 09.45 Self-assessment review

09.45 - 12.40

Risk Identification and Cartography Assessment Process

  • Frequency and severity assessment
  • The three risk identification principles
  • Risk cartography across the institution

FTP - Funds Transfer Pricing (part 1)

  • The ALM, its role and functions
  • Organizational types of internal funds transfers
  • Commercial and financial margins
  • Policies for setting the margins
  • Articulation with the global interest margin of the bank

12.40 - 13.40 Lunch

13.40 - 16.30

FTP - Funds Transfer Pricing (part 2)

  • Setting up the right commercial incentives
  • Insuring coherence between global and commercial margins
  • The benefits of reference refinancing
  • Reference refinancing implementation
  • Exercises and Q&A

RAROC, Risk Adjusted Return On Capital

  • Objective and definitions
  • RAROC possible uses
  • Components of the RAROC
  • Live demonstration

Wrap-up and Termination of the Seminar

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