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ALM / Treasury
A Three Day Training Seminar on ALM Best Practices featuring Liquidity Management by Business Line, Funding Optimality, Stress Scenarios, Basel III Compliancy and Counterparty Risk/ CVA
Day One
Intro to ALM
- Business Cycles and Interest Rates
- Risks and Rewards
Funds Transfer Pricing
- The case for scale economies and skill centralization
- Identifying Economic Value Added of Customer Banking businesses
- Product & Customer Profitability Controls
- Illustrative Case Study drawn from a mortgage bank´s balance sheet
- The Treasury Business Remit:
- The Treasury “Banking Books”: Net Interest Income Generation (with / without customer Margin)
- Case Study with Excel simplified Balance Sheet
- Liquidity Risk (internal lender of last resort)
- Case Study with Excel simplified Balance Sheet
- Re-Pricing Risk (interest rates, FX)
- Case Study with Excel simplified Balance Sheet
- Maturity Mismatch Risk & the Dynamics of Liquidity Gaps
- Illustration of Citigroup´s Dynamic Balance Sheet
- ST (MT & LT) Funding & Securing of Contingent Funding / Liquidity sources
- Modeling (Replicating) Customer Assets & Liabilities: “The model books”
- Example: Swiss Bank
- The maturity transformation and “riding the yield curves”
- Example: Large US International Bank
- Regulatory Compliance & Rating Safeguarding
- Counterparty Default & Settlement Risks
- Management of a Customer Banking Book
- Hedging Risks with “macro-swaps”
- Basis Risks in banking books
- Case Study: Hedging Re-pricing risks with Constant Maturity Swaps
- Liquidity Premium determination – best practices
- P&L Volatility Issues – which FTP Mechanism is best suited?
- Case Studies
- Immunizing Retail Customer Margins via adequate FTP – Examples
- Traditional Methods:
- Cost of funds Method
- Matched Maturity Method
- Asset/Liability pooling
- Off Balance Sheet Considerations
- Institutional Blended cost of Funds Determination
- Universal Banking Models (employing SFT & REPO Structures)
- Retail Banking Models
- Pushing the edge of the envelope:
- FTP for Credit Risk: the Credit Treasury Model
- Best Practices Examples from US & European Banks
Day Two
- The ALCO Business Remit
- ALCO vs. Treasury
- Long Term Investment Policies
- Case Study: Deploying shareholders Equity
- Treasury Philosophies beyond Liquidity Providers of Last Resort
- Profit Centers: NII Producers
- Service Centers: Margin Stability Providers
- Repricing Gaps vs DV01/ Duration/Convexity
- Liquidity Gaps
- Managing Asset Liquidity – Case Study
- Stress Testing Deposit “Stickiness”- Case Study
- The Stress Testing Conundrum:
- What does the regulator expect from Banks?
- Stress Testing Scenarios
- Credit Stress Testing
- Reverse Stress Testing
- Integration of Stress Testing into the Risk Management Framework
- Crisis Management
- Ex Ante Market Access
- Defensive Measures
- Recentralisation
- Funding Management
- Prioritising Funding Draw-downs
- Extending Liabilities Maturities
- Suspending Cash Flows
- Risk Hedging
- Hedging Interest Rate Risk – Best Practices
- Hedging with Eurodollar Futures
- Cross Hedges
- Managing Basis Risk
- Hedges with OTC Derivatives:
- IR Swaps
- Caps, floors, Swaptions
- Accounting for Treasury Books: IFRS
- Fair Value Hedges – Key Issues
- Swapping risk to OIS Curves
- MtM vs “Available for Sale” vs. Held to Maturity” Books
- Accrued vs. MtM Accounting Standards – link to financial accounting for Net Interest Income
- Regulatory Compliance – Liquidity
Day Three
- Modeling Customer Behavior – Model Risks
- Risk Management in Treasury books
- Risk in ALCO “Strategic” Books
- Market Risks
- Credit & Counterparty Default Risks in ALM Banking Books
- CVA & Collateral/ Daily Margining
- Funding Liquidity Risk
- Asset Liquidity risk
- Group Project: Integrated Risk in a Commercial Bank´s ALM Books
- Best Practices Risk Management Standards
- Capital Management: Economic vs Regulatory Capital
- Growth via Leverage Strategies – Risk controlled Arbitrage (Example)
- New Regulatory Standards:
- Basel III
- Basel “2.5”
- Liquidity Risk Models by individual Business Line:
- Reliance on reverse Repos in capital markets businesses
- Specificities for derivatives market makers
- Asset Management Liquidity - Idiosyncracies
- Basis Risks in banking books
- Case Study: Hedging Re-pricing risks with Constant Maturity Swaps
- Profit Centers: NII Producers
- Service Centers: Margin Stability Providers
- ALCO/ Treasury Governance – Best Practices
- Integrated Universal Bank Model
- Local Universal Bank Model
- Capital Markets Market Maker Model
- Funding Liquidity Management – Best Practices
- Liquidity Management at a large Swiss Universal Bank – Case Study
- Discussion and Q & A