Basel III Capital Adequacy Training Course

Participants can reconcile accounting equity to Basel III regulatory capital measures.

• Regulatory balance-sheet mapping from audited accounts to prudential reporting lines
• Common Equity Tier 1 composition and qualifying share capital criteria
• Additional Tier 1 instruments, loss-absorption features and distribution restrictions
• Tier 2 capital instruments, maturity treatment and amortisation requirements
• Reconcile retained earnings, reserves and accumulated other comprehensive income
• Distinguish accounting consolidation from prudential consolidation and deductions

Participants can determine eligible capital after applying required regulatory adjustments.

• Eligibility tests for CET1, AT1 and Tier 2 instruments
• Apply deductions for goodwill, intangible assets and deferred tax assets
• Threshold treatment for significant investments in financial sector entities
• Prudential filters for cash-flow hedges, defined-benefit assets and gains
• Calculate minority interest recognition within consolidated regulatory capital
• Document capital-instrument terms against Basel eligibility requirements

Participants can calculate capital requirements and assess available capital buffers.

• Calculate CET1, Tier 1 and Total Capital ratios
• Minimum Pillar 1 requirements for CET1, Tier 1 and Total Capital
• Capital conservation buffer mechanics and maximum distributable amount restrictions
• Countercyclical capital buffer calculation using jurisdictional buffer rates
• Systemic bank buffers for global and domestic systemically important banks
• Assess headroom against combined buffer requirements and management targets

Participants can calculate credit risk-weighted assets using the standardised approach.

• Exposure classes under the revised standardised approach for credit risk
• Assign risk weights to sovereigns, banks and public-sector entities
• Corporate exposure treatment using external ratings and due-diligence requirements
• Retail, residential mortgage and commercial real-estate risk-weight calculations
• Off-balance-sheet conversion factors for guarantees, commitments and trade finance
• Calculate credit risk-weighted assets from exposure values and risk weights

Participants can reflect collateral, guarantees and derivatives in credit capital calculations.

• Credit risk mitigation eligibility for financial collateral and guarantees
• Simple and comprehensive approaches for financial collateral risk mitigation
• Haircuts, maturity mismatches and currency mismatches in collateral calculations
• Substitution approach for eligible guarantees and credit derivatives
• SA-CCR exposure measurement for over-the-counter derivative transactions
• Counterparty credit risk capital requirements for margined and unmargined trades

Participants can interpret IRB risk parameters and resulting capital requirements.

• Foundation and advanced IRB approaches within Basel credit risk rules
• Probability of default estimation, calibration and long-run average requirements
• Loss given default, exposure at default and maturity parameters
• IRB risk-weight functions for corporate, retail and sovereign exposures
• Downturn LGD requirements and conservative margin-of-conservatism treatment
• Model governance, validation, overrides and supervisory approval expectations

Participants can identify specialist credit portfolios requiring distinct capital treatment.

• Slotting criteria for project finance, object finance and commodities finance
• Income-producing real-estate treatment within specialised lending exposures
• Securitisation roles: originator, sponsor, investor and liquidity provider
• Securitisation capital approaches, due diligence and risk-weight floors
• Credit risk transfer assessment for traditional and synthetic securitisations
• Equity exposure classification and applicable standardised risk-weight treatment

Participants can explain market risk capital treatment under the revised framework.

• Trading book boundary rules and banking-book reclassification restrictions
• Sensitivities-based method for delta, vega and curvature risk
• Default risk charge for credit-sensitive trading-book positions
• Residual risk add-on for exotic instruments and non-modellable risks
• Internal models approach, expected shortfall and model approval conditions
• Profit-and-loss attribution testing and backtesting consequences for capital

Participants can calculate operational risk capital using the Basel standardised approach.

• Operational risk definition, loss-event categories and boundary with credit risk
• Business indicator components from interest, services and financial statements
• Business indicator component calculation and marginal coefficient application
• Internal loss multiplier mechanics and loss-data quality considerations
• Operational loss-event recording, thresholds, recoveries and gross loss treatment
• Control themes linking operational risk losses to capital planning

Participants can calculate non-risk-based constraints and concentration exposure limits.

• Leverage ratio purpose as a backstop to risk-based capital requirements
• Exposure measure components for on-balance-sheet assets and derivatives
• Securities financing transaction exposure measurement and netting conditions
• Off-balance-sheet item conversion factors within leverage exposure calculations
• Large exposure limits, eligible capital base and connected counterparties
• Compare leverage ratio constraints with risk-weighted capital ratio constraints

Participants can assess how final Basel III reforms affect bank capital outcomes.

• Basel III final reform objectives and implementation timetable considerations
• Revised credit risk standardised approach changes by exposure class
• Constraints on IRB modelling for low-default and specialised portfolios
• Output floor calculation using standardised risk-weighted asset measures
• Aggregate floor effects across credit, market and operational risk
• Assess portfolio and business-model consequences of output-floor binding constraints

Participants can explain how supervisors assess risks beyond Pillar 1 calculations.

• Pillar 2 purpose, supervisory judgement and institution-specific capital requirements
• Supervisory review of governance, risk management and internal controls
• Pillar 2 risks: concentration, interest-rate, pension and strategic risk
• Pillar 2 guidance, requirements and interaction with capital buffers
• Supervisory stress testing, remediation plans and capital add-ons
• Prepare evidence supporting supervisory review and challenge discussions

Participants can structure an ICAAP linking material risks to internal capital needs.

• ICAAP purpose, proportionality and alignment with business planning cycles
• Material risk identification using risk taxonomy and risk-assessment criteria
• Economic capital, regulatory capital and management capital comparisons
• Capital adequacy assessment across base, adverse and reverse-stress scenarios
• Capital planning horizon, management actions and contingency triggers
• ICAAP governance, independent challenge, approval and documentation standards

Participants can build capital forecasts under baseline and stress scenarios.

• Capital planning model linking earnings, losses, distributions and capital issuance
• Translate macroeconomic scenarios into credit, market and operational risk drivers
• Forecast risk-weighted assets using portfolio growth, migration and model assumptions
• Model profit and loss effects on retained earnings
• Assess management actions for plausibility, timing and execution risk
• Reverse stress testing to identify capital buffer breach points

Participants can use capital measures to inform portfolio and business decisions.

• Risk-adjusted return on capital metrics for product and portfolio decisions
• Capital allocation methods using risk-weighted assets and economic capital
• Price lending transactions using expected loss, funding and capital charges
• Evaluate dividend, coupon and bonus constraints under buffer stress
• Assess capital impacts of acquisitions, disposals and legal-entity restructurings
• Management information dashboards for capital ratios, drivers and headroom

Participants can review capital disclosures and identify reporting control requirements.

• Pillar 3 objectives, disclosure frequency and proportionality principles
• Core templates for capital composition, ratios and risk-weighted assets
• Reconcile Pillar 3 disclosures with prudential returns and financial statements
• Data lineage from source systems through calculation engines to disclosures
• Disclosure controls for completeness, accuracy, approval and version management
• Identify common reporting errors through variance analysis and reasonableness checks

Participants can design practical controls for reliable capital adequacy calculations.

• Source-data inventory for exposures, collateral, ratings and capital instruments
• Data-quality controls for completeness, accuracy, timeliness and traceability
• Calculation-engine controls including parameter governance and change management
• Reconciliations between general ledger, risk systems and regulatory returns
• Exception reporting for missing ratings, invalid collateral and stale valuations
• Control testing evidence for internal audit and supervisory review

Participants can define governance responsibilities for capital adequacy oversight.

• Board responsibilities for capital adequacy, risk appetite and capital plans
• Senior management committees for capital monitoring and escalation decisions
• Three-lines model for ownership, oversight and independent assurance
• Risk appetite statements linking capital thresholds to management actions
• Internal audit scope for capital calculations, ICAAP and disclosures
• Remediation tracking for audit findings and supervisory observations

Participants can assess capital adequacy findings and prepare a defensible remediation response.

• Common supervisory findings in capital eligibility and risk-weight calculations
• Root-cause analysis using process, data, system and governance categories
• Prioritise remediation actions by capital impact, regulatory urgency and dependency
• Define corrective-action owners, milestones, evidence and quality reviews
• Validate remediation effectiveness through recalculation, testing and independent challenge
• Report remediation progress to committees, boards and supervisory authorities

Participants can build, review and present a complete Basel III capital adequacy assessment for a bank.

• Consolidate capital resources, regulatory adjustments and eligible capital instruments
• Calculate credit, market and operational risk-weighted asset requirements
• Assess leverage ratio, capital buffers and output-floor implications
• Prepare ICAAP risk assessment, stress scenario and capital forecast
• Review disclosure, data-control and governance issues requiring remediation
• Present management recommendations supported by capital calculations and evidence