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RMCMB-P07
(PGDM 2007-09 : Term-V)

Risk Management & Capital Measurement in Banks
(Faculty: Prof. Asit Ranjan Mohanty)
Email: Asit.Mohanty@ximb.ac.in

COURSE OUTLINE

Introduction

The preparedness for implementation of Basel II has sensitised the banks that the maintenance of capital is emerged as dynamic concept reflecting the various risk banks undertakes during the course of their business. The objective of this course is to provide insight to the students an in-depth understanding and hands on exposure with Risk Management techniques in order to estimate the capital requirements for the Banks with the application of Basel II Approach.

The course would provide understanding of theoretical concepts in the field of Risk Management and how these theories are applied into practices in Banks. Students would learn how to use the concepts they have already learned in Accounting, Financial Management, Fixed Income Securities, Econometrics, and Derivatives courses in Measurement and Management of Risk in Banks.

Background

In the evolving financial environment, Banks & Financial Services Industries (BFSI) are exposed to different types of risks. The management of risk has become very important matter of concern for efficient use of Capital across business lines and, also for strengthening the soundness and stability of the banking system and efficient use of Capital across business lines. The building blocks for management of risks are broadly divided into:

· Risk Identification
· Risk Measurement
· Risk Pricing
· Risk Monitoring and control
· Risk Mitigation
The implementation of Basel II accord to provide capital cushion against the unexpected losses is the major challenge for the Banks.

In this context, this course has been designed to address the concerned issues with the purpose of providing increasing knowledge and capacity to the BFSI sectors in order to estimate, mitigate and manage the risks. This course covers an in-depth analysis of capital computation for Credit, Market and Operational Risk. It also provides critical inputs for estimation of Economic Capital (EC) for credit risk and Risk Based Pricing (RBP) which is the ultimate goal of managing the risk.

Recommended Text:


· CREDIT RISK MANAGEMENT – A PRACTICAL AAPROACH : ARUNDEEP SINGH & N.S.TOOR, SKYLARK PUBLICATION, NEW DELHI · CREDIT RISK MANAGEMENT : S.K.BAGHI, JAICO PUBLISHING HOUSE
· International Convergence of Capital Measurement and Capital Standards: A Revised Framework Comprehensive Version, June 2006, Bank of International Settlement Publication
· Guidelines for Implementation of the New Capital Adequacy Framework(NCAF) April 200: Reserve Bank of India Publication
· Credit Risk Management & Basel II , An Implementation Guide: Bhatia Mohan, Risk Books Publication,2006 · Credit Risk Measurement : Saunders Anthony, John Wiley & Sons, 1999

· Fundamentals of Risk Measurement : Marrison Chris, Tata McGRAW-Edition 2005

· Risk Management : Indian Institute of Banking and Finance, Macmillan Publication

· Discussion Papers on Implementation of the Basel II Capital Framework: Australian Prudential Regulation Authority (APRA), http://www.apra.gov.au/ADI/Basel-II-implementation-in-Australia.cfm

· Collection of Reading Materials : Sources – Bank of International Settlement(BIS) & Reserve Bank of India(RBI)

The students will assign themselves into groups of maximum three and work on the term paper. The understanding of the concepts and the Proof of the Concepts (POC) by using dummy data / actual data (if available) along with the findings and conclusions are to be reflected in the term paper. Students should submit their team names by 15th of October, 2008 and the report should be submitted on or before the end of the day of the last session of the course. However, the repetition of the Topics for the Term Paper among different groups is allowed. The group names and the selected topics should be routed through your Class Representative(CR).The last date of submitting the Term Taper is on 2nd December which is also be routed through your CR.

Class Participation (CP)

Class-participation is an integral component of the learning process. CP includes the attendance & discipline in the classroom and to raise interesting issues for discussion. For each class, I would give you a weigh from -20% to 10% depending upon the above criteria. If you miss a class you would get 0 for that class. In case any of you is found to be indiscipline and disturbing the class, he will get negative weight. All students are expected to take an active part in class discussions. Therefore, it is not enough for a student to do well in the above-cited quizzes/term paper/End Term assignments. The weight assigned in the CP will be reflected in the overall rating of the Term Paper.
Contents

The details of the content of the course are given below.

Module 1: Introduction to Risk Management in Banks – 2 Sessions
Module 2: Standardised Approach to Credit Risk & Credit Risk Mitigation – 4 Sessions
Module 3: Internal Rating Based Approach (IRB) to Credit Risk– 8 Sessions
Module 4: Market Risk & Operational Risk – 4 Sessions
Module 5 :Capital Structure & Computation of Economic Capital – 2 Sessions
Module 1 : Introduction to Risk Management in Banks
Module 2: Standardised Approach to Credit Risk & Credit Risk Mitigation Module 3 : Internal Rating Based Approach(IRB) to Credit Risk · Session 9 & 10: Explanation of IRB Risk Weight Function, Techniques of Credit Risk Mitigation in IRB Approach with Test Cases
· Session 11 & 12: Internal Credit Risk Rating Model for Corporate · Session 13 & 14: Designing Model for Credit Risk Index for Banks (CRIB) using CAMELS , Module 4 : Market Risk & Operational Risk
· Session 15 & 16: Approaches to Market Risk covering Interest Rate Risk in Trading Book, Forex Risk, Equity Risk & Market Related Off Balance Sheet Items · Session 17 & 18: Approaches to Operational Risk : Building Blocks for Operational Risk, Basic & Standarsised Approach with Test Cases, Capital Structure and Capital Computation with Test Cases Module 5 : Capital Structure & Computation of Economic Capital Code of Ethics
For individual quizzes/End term, it is unethical to seek any direct help from others, whether or not you finally make use of the help. Discussions among individuals either in class-room or in the examination hall are completely forbidden. Those who will be identified disturbing in the class will be asked to leave the class immediately. The Tem Paper should be totally in the group/individual’s own style and language, and should reflect group/individual understands. Any form of copying from one another or from any outside source is forbidden. Any unfair means while writing the term Paper will be easily identified, and the respective group will be penalized in terms of lower score. No one is allowed to come to the class after the scheduled start time.

Feedback
I would also request you to give me continuous feedback. I would be in the class room for one hour after the class is over to take up your doubts and feed back. You may form a “focus group” (consisting of 6-7 students from the class with diverse backgrounds including the CR) that continuously interacts with the students and informs me about their problems, if any, with the course.

Contact Details

Though I am usually available in my office till late in the evening, it is better to check beforehand. I also come to office on weekends and would try to give you a weekend appointment if you need one. You can, of course, always reach me by e-mail at asitmohanty123@gmail.com. You can add me in your G-Talk for any urgent discussion. My Ext – 995 and Cell no is 94386 69607.

Wish all of you the best of everything.
Created By: Bijoy Kar on 08/06/2008 at 05:34 PM
Category: PGP-II Doctype: Document

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