Basel III Risk and Stress Testing Training Course

Participants can assess whether risk governance and appetite arrangements support Basel III compliance.

• Board, risk committee and senior management accountabilities under Basel governance
• Three lines model applied to risk ownership and independent challenge
• Risk appetite statement structure: objectives, metrics, limits and triggers
• Cascading enterprise appetite limits into business-line risk limits
• Escalation protocols for appetite breaches, exceptions and remediation actions
• Risk culture indicators and conduct considerations within prudential governance

Participants can calculate and interpret Basel III capital components and buffer requirements.

• Common Equity Tier 1 eligibility criteria and prudential deductions
• Additional Tier 1 and Tier 2 instruments distinguished
• Calculate total capital ratio from capital resources and risk-weighted assets
• Capital conservation buffer, countercyclical buffer and systemic buffers assessed
• Transitional arrangements and fully loaded capital positions compared
• Dividend restrictions and maximum distributable amount implications reviewed

Participants can identify key drivers of credit risk-weighted assets under Basel III.

• Standardised approach exposure classes and risk weights examined
• External ratings, collateral and guarantees affecting credit risk weights
• Internal ratings-based parameters: PD, LGD, EAD and maturity
• Credit risk mitigation techniques and residual risk considerations
• Defaulted exposures, provisions and prudential treatment compared
• Portfolio migration analysis linked to stressed risk-weighted asset projections

Participants can assess market and counterparty exposures relevant to Basel III capital planning.

• Trading book boundary and banking book classification controls
• Value-at-Risk, stressed Value-at-Risk and expected shortfall compared
• Sensitivities-based method for market risk capital introduced
• Counterparty credit risk exposure measures and netting agreements reviewed
• Credit valuation adjustment risk and capital consequences explained
• Wrong-way risk identified within derivatives and collateral arrangements

Participants can incorporate operational and non-financial risks into capital and stress assessments.

• Basel standardised measurement approach inputs and business indicator components
• Operational loss event taxonomy and loss data quality controls
• Risk and control self-assessment linked to operational risk scenarios
• Cyber risk, conduct risk and third-party risk stress channels
• Scenario analysis for low-frequency, high-severity operational losses
• Insurance recoveries, legal risk and management actions evaluated

Participants can assess liquidity resilience using Basel III liquidity and funding metrics.

• Liquidity Coverage Ratio numerator and denominator calculated
• High-quality liquid assets eligibility, haircuts and operational constraints
• Net cash outflows under prescribed thirty-day stress conditions
• Net Stable Funding Ratio available and required funding factors
• Contractual maturity mismatch and concentration risk reporting analysed
• Contingency funding plan triggers, options and governance established

Participants can structure an ICAAP and ILAAP assessment around material risks and evidence.

• ICAAP purpose, scope and supervisory expectations defined
• Material risk inventory built using quantitative and qualitative assessment
• Economic capital, regulatory capital and accounting capital distinguished
• Multi-year capital plan aligned with strategy and risk appetite
• ILAAP evidence for liquidity adequacy, funding and intraday risk
• Management actions tested for feasibility, timing and unintended consequences

Participants can evaluate risk data capabilities needed for reliable stress testing and reporting.

• BCBS 239 governance, architecture and data ownership principles
• Data lineage traced from source systems to regulatory risk reports
• Risk data completeness, accuracy, timeliness and adaptability assessed
• Reconciliation controls between finance, risk and treasury data implemented
• Manual adjustments logged, approved and retained for audit evidence
• Management information dashboards designed for exception and trend reporting

Participants can design a governed stress-testing framework with clear scope and controls.

• Stress-testing policy defines purpose, scope, frequency and accountability
• Enterprise-wide, portfolio, sensitivity and reverse tests differentiated
• Materiality assessment prioritises risks, portfolios and legal entities
• Scenario severity calibrated against historical evidence and expert judgement
• Model inventory records methods, owners, limitations and approvals
• Independent review challenges assumptions, outputs and management responses

Participants can construct coherent macroeconomic scenarios for capital and liquidity stress tests.

• Baseline, adverse and severely adverse scenarios structured consistently
• GDP, unemployment, inflation and interest rate paths specified
• Exchange rates, property prices and commodity shocks incorporated
• Narrative scenario drivers translated into measurable economic variables
• Correlation assumptions tested across macroeconomic and financial risk factors
• Scenario plausibility documented using historical episodes and forward-looking judgement

Participants can project credit losses and capital effects under adverse economic scenarios.

• Satellite models link macroeconomic variables to default probabilities
• Transition matrices project rating migration under stressed conditions
• Stressed PD, LGD and EAD assumptions documented by portfolio
• Expected credit loss stages and lifetime loss estimates projected
• Sector, geography and borrower concentration effects analysed
• Credit loss forecasts reconciled with provisions and capital impacts

Participants can quantify non-credit stress effects on capital, earnings and liquidity.

• Interest rate shocks projected through earnings and economic value
• Foreign exchange, spread and equity shocks applied to positions
• Liquidity runoff assumptions tested by depositor and funding source
• Collateral calls, margin requirements and liquidity spirals estimated
• Operational disruption scenarios quantify losses and recovery costs
• Cross-risk interactions assessed between market, liquidity and credit stresses

Participants can connect stressed credit impairment, profitability and capital projections.

• IFRS 9 staging criteria and significant increase thresholds reviewed
• Point-in-time and through-the-cycle risk parameters distinguished
• Management overlays governed through evidence, approval and monitoring
• Pre-provision profit forecasts built from income and expense drivers
• Tax effects, distributions and balance-sheet growth integrated
• Capital depletion path projected under baseline and adverse scenarios

Participants can identify failure points and credible recovery actions using reverse stress testing.

• Reverse stress testing starts from breach or failure conditions
• Failure thresholds defined for capital, liquidity and market confidence
• Combination scenarios identify events capable of breaching thresholds
• Recovery indicators, triggers and escalation thresholds aligned
• Recovery options assessed for capacity, timing and execution risk
• Wind-down considerations and resolution planning interfaces discussed

Participants can review stress-testing outputs, challenge weaknesses and report decision-relevant results.

• Model validation tests conceptual soundness, outcomes and implementation accuracy
• Benchmarking compares model outputs with alternatives and realised performance
• Sensitivity analysis identifies assumptions driving capital and liquidity results
• Limitations register documents uncertainty, compensating controls and remediation
• Board reporting presents vulnerabilities, management actions and decision points
• Supervisory review evidence organised for traceability and challenge

Participants can build, review and present a complete Basel III risk assessment and stress-testing pack.

• Define material risks, governance roles and risk appetite metrics
• Calculate capital, liquidity and risk-weighted asset starting positions
• Select adverse scenario drivers and document transmission channels
• Project credit losses, earnings, capital ratios and liquidity gaps
• Assess management actions, recovery triggers and residual vulnerabilities
• Present findings, limitations and recommendations to a risk committee