November 3 - 5, 2020

Bank Capital Management

Capital Planning, Fund Transfer Pricing and RAROC

Register Now Agenda Program Online
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Prague, NH Hotel Prague
€ 1,755 + VAT
Jean-Bernard Caen
Both in-class and online training available
Price for online training
€ 1,316 + VAT
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Key points / questions answered:

Understanding the Role of Banks Capital
Articulating Capital, Risk and Return
Risk Identification, Measurement and Aggregation
Regulatory and Economic Capital Assessment
Internal Funds and Risk Transfer Pricing
Forward-Looking View and Capital Allocation to Businesses
Risk-Adjusted Performance Measurement and Monitoring
How to link risk, return and capital to maximize the bank's value creation?

The purpose of this seminar is to give you a clear understanding of what is banks capital and how to use it to create value. Banks are currently managed using two desynchronized steering wheels: The regulatory framework that ignores profitability, and the accounting framework that - until recently - ignores risk. Economic Capital and IFRS 9, increasing competition from FinTechs and the need for a better servicing of the economy are promoting a review of how banks manage their capital. This seminar clarifies for you the issues and the practical ways to handle them.

The three days are articulated as follows: On day 1, we clarify the nature of capital and its articulation with risk and return; On day 2, we learn how to measure economic risks so that the results are usable both for micro- and macro-management decision support; On day 3 we enter the internal mechanics of transferring funds and risks within the bank and still retaining the coherence required for proper performance assessment and the support of management actions.

Day 1 starts with the exploration of the different capital metrics: Regulatory, accounting and economic. We look at the multiple components of capital and their "raison dêtre". Once the articulation between capital and risk is clearly defined, we address the issues of risk appetite and tolerance, capital usage and allocation. We end the day with the RICAP, the process used to identify and classify risks.

Day 2 is entirely dedicated to Economic Capital. It is a key component of banks capital management. In its aggregate form, it measures the need for capital. It constitutes a risk metrics that is neutral and transverse, applicable to all measurable risks. We look at how to link Economic Capital with profitability and capital measures, to provide powerful top to bottom performance measures and efficient management decisions support.

Day 3 addresses the intricacies of moving capital, risks and funding within the bank in such a way that performance and risk indicators remain relevant and efficient for any subset of the bank, at any level of aggregation.

And we conclude the seminar with issues related with macro-prudential considerations: what issues are born from the discrepancies between the views of regulators and of shareholders regarding capital levels, and what are the challenges this creates for banks and for the economy as a whole.
PDF brochure with all details about the Bank Capital Management seminar is available on request.

Program of the seminar: Bank Capital Management

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00

The Nature and Utility of Banks Capital

  • Why do banks need capital?
  • The regulatory, accounting and economic views of capital
  • Capital regulation from Basel 1 to Basel 4 and beyond
  • Accounting capital, its components and the role of equity
  • Economic capital and value creation
  • Capital allocation and financial planning

The Articulation between Capital and Risk

  • Capital as a means to take risks and generate profits
  • Risk appetite objective and indicators
  • Risk tolerance logic
  • Risk, return and capital, the magic triangle
  • Assessing added value
    • Economic Profit
    • RAROC and Economic Value Added

12.00 - 13.00 Lunch Break

13.00 - 16.30

Capital Planning and Risk Management

  • Fundamental components of capital planning
    • Internal control and governance
    • Capital policy and risk capture
    • Forward-looking view
    • Management framework for preserving capital
  • Benefits of capital management
    • Risk strategies, diversification, market share, pricing

Foundations of Risk Management

  • A brief history of Risk Management
  • The RICAP process
    • Risk hunting and identification
    • Risk taxonomy
  • Game on all issues covered during day 1

09.00 - 09.15 Brief Recap

09.15 - 12.00 Economic Capital Concepts

  • Foundations of Economic Capital
    • The seven guidelines
  • Implementation steps
    • Articulation with Basel Pillar 2
    • Articulation with Finance/IFRS 9

Economic Capital Assessment

  • Steps to measuring Economic Capital
    • Risk Capital as standalone risk measure
    • Economic Capital as Marginal risks measure
  • Measuring Credit Risk Capital
    • Basel 2/3 formula analysis
    • Credit VaR and concentration
  • Measuring market risks
    • Balance sheet and trading risks
    • Interest rate, FX, equity, spread and other market risks
  • Measuring operating and other risks
  • Aggregating risks
    • Managing inter risks correlations

12.00 - 13.00 Lunch Break

13.00 - 16.30

Economic Capital in Practice

  • Expected results and interpretation
    • Business models and risk profiles
  • Articulating Economic and Regulatory Capital
    • Perimeters and severity level
    • Risk coverage and methodologies
  • Organization of the Economic Capital team
    • Required functions, committees and IT support
  • Benchmarks and review of banks disclosures

Case study: Dexia

  • The rise and the fall: facts and figures
  • Analysis and lessons

09.00 - 09.45 Economic Capital Exercise Review and Discussion

09.45 - 12.00 Funds Transfer Pricing

  • Organization of the ALM, the nuclear reactor of the bank
  • Commercial and Financial margins
  • Steering of the Commercial margin
  • Steering of the Financial margin
  • Pricing internal funding using Reference refinancing

12.00 - 13.00 Lunch Break

13.00 - 16.30 RAROC, Macro-prudential Regulation

    • Different types of Risk Adjusted measurement
    • Analysis of RAROC components
    • Live exercise
  • Discussion of macro-prudential regulation issues
    • Can bank still measure their risk properly?
    • What impact of the banking regulation on the economy?
    • Moral hazard and the future of regulation

Final game

Termination of the Seminar and Evaluation

Location and Registration



The seminar will be held in an attractive destination in the very heart of Europe.

More Information

Online training seminar

The seminar will also be held globally online on the same days as the in-class event.


Registration Deadline

October 20, 2020

Register Now
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