Registration and formation of Discussion Teams

Introduction to Seminar
Charles Calomiris, Paul M. Montrone Professor of Private Enteprise, Columbia University

Welcome Reception (World Bank Headquarters)

Day 1: Banking Regulatory and Supervisory Framework

0900

Opening Remarks
James D. Wolfensohn, President, World Bank

Keynote Address
Roger W. Ferguson, Vice Chairman, Board of Governors, Federal Reserve System of the United States

Panel Discussion: The Role of the Basel Accord in Bank Supervision and Its Impact on Developing Countries

• Jeffrey Carmichael, Chairman, Australian Prudential Regulation Authority

• Cesare Calari, Vice President, Financial Sector, World Bank

• Andrzei Reich, Director, Superivsory Policy Division, General Inspectorate of Banking Supervision, National Bank of Poland

• Alvir Alberto Hoffmann, Senior Advisor to the Director of Supervision, Bank of Brazil

• Charles Calomiris, Paul M. Montrone Professor of Private Enterprise, School of Public Health, Division of Health Management and Policy, Columbia University

Coffee Break

Case Study: Issues for Banks in Emerging Markets to Apply the IRB Approach (based on the Australian experience)
Jeffrey Carmichael, Chairman, Australian Prudential Regulation Authority

• Data deficiencies

• The self-assessment stage

• Comparing and validating models

• Use of external benchmarks

• Cyclicality

• Stress testing

• Ongoing model audits

Lunch

Today's Banking Risks and the Current Regulatory and Supervisory Framework
Dr, Ceyla Pazarbasioglu, Vice President, Banking Regulation and Supervision Agency of Turkey

• Global trends

• Broadening scope of bank activities

• Topology of banking risk management and their evolution

• Toward better banking risk management and control

• A review of the Basel II proposals:
  • Background
  • Pillar I: New capital requirement calculations
  • Pillar II: Reinforced supervision
  • Pillar III: Fuller disclosures and market discipline

  • Further work and timetable

• Main shortcomings and recent lessons

• Questions

Group split into “Discussion teams” and go to brainstorm and discuss key challenges and issues the regulators are experiencing in risk management. Discussion topics and questions will be included as pre-assignment in the registration package.

Coffee Break

Teams regroup in main hall to make presentations and discuss.

Chairman's Closing Remarks

End of Day 1

0910

Elements of Market Risk
Professor Ian Giddy, Professor of Finance, Stern School of Business, New York University

• The nature of market risks
  • The evolution of market risks: volatilities and correlations: comparison across countries
  • Dynamic market risks: foreign exchange, interest rate, equities, and commodities

  • Semi-static and less liquid market risks: long term volatilities, repo costs, and dividends

• Market risk exposures and controls
  • Recognition of market risks: trading book vs. banking book risks
  • Treatment of exceptional market risks in the banking book

  • Hedging methods—the paramount role of derivative instruments

• Market risk standard measurement methods
  • Building block methods for interest rate, foreign exchange, equities and commodities
  • Standard methods for simple option risks (scenario and buffer methods)
  • Shortcomings of standard methods
• Questions

Stress Testing Financial Systems
Alejandro Latorre, Senior Risk Specialist, Bank Supervision Group, Federal Reserve Bank of New York

• What is it and why do it ?

• What makes a good stress test ?

• Different types of single factor stress tests

• Multi-factor stress tests (an introduction)

• Stress test reporting strategies

• Stress tests and economic capital

• Developing country example(s)

• Questions

Coffee Break

Evaluation of Alternative Market Risk Measurement Techniques
Prof. Peter Christoffersen, Faculty of Management, McGill University

• Value-at-Risk (VaR)
  

• Variance-covariance approach

• Historical correlations

• Scenario analysis
  

• Monte Carlo simulations
  

• Holding period and significance
  

• Value at Risk (VaR) and Expected Shortfall (ES)

• Forecasting market volatility and asset correlation

• Modeling fat tails and simulations

• Back testing and stress testing
  

• Questions

Lunch

Technical Modelling Workshop
Prof. Peter Christoffersen, Faculty of Management, McGill University

Materials included in registration package with questions for analysis. Workshops will be conducted in discussion groups using laptop computers.

• Estimating GARCH models and dynamic conditional correlations

• Calculating VaR and ES with fat tails and assessing model risks

• Implementing filtered historical simulation and scenario analysis

• Questions

Coffee Break

Risk Management and Control
Evan Picoult, Managing Director, Risk Architecture Department, Citigroup

• Valuation integrity: What can go wrong?

• Data issues and reliability

• Calculating volatilities and correlations

• Identifying factor sensitivities

• Simulating changes in interest rates and equity prices

• Questions

Chairman's Closing Remarks

End of Day 2

Day 3: Credit Risks

0900

Chairman's Opening Remarks

Framework for Evaluating Credit Risks
Robert Scanlon, Global Head of Credit Risk for Emerging Markets, Credit Suisse First Boston

• What is credit risk?
  

• Constituents of credit risk
  

• Expected and unexpected losses
  

• Regulatory treatment
  

• Diversification/concentration
  

• Credit mitigation
  

• Management and control
  

• Introduction to the application of credit risk models
  
  • Modelling default; KMV: ‘Credit Monitor’ (Moody’s)
    

  • Portfolio models of credit risk; CreditMetrics (JP Morgan Chase), CreditRisk+ (Credit Suisse)
    

• Questions

Securitization Techniques and Strategies in Developing Markets
Thuy T. Doan, Managing Director, Global Head of BFI Securitization Programmes, BNP Paribas

• Reasons for securitization
  

• Transaction structures and participants
  

• Goals of the Issuer vs. Goals of the Investor
  

• Managing the risks of securitized instruments
  

• Overview of legal, regulatory, tax and accounting considerations
  

• Securitization in the New Basle Capital Framework
  

• Developing country example(s)
  

• Questions

Coffee Break

Discussion: Use of Derivatives as Risk Management Tool
Robert LeBlanc, Global Head of Risk, Barclays Capital

• Understanding derivatives as a tool to hedge risk
  

• Pros and cons of derivatives
  

• Applications of alternative derivative products
  

• Infrastructure requirements for derivatives trading
  

• Supervision and regulation of derivatives
  

• Examples of derivative applications

Lunch

Country Case Study: Argentina's Financial System—The Case of Banco de Galicia (download 1.5 Mb PDF of case study)
Professor Huw Pill, Assistant Professor of Business Administration, Graduate School of Business Administration, Harvard University

Coffee Break

Case Study: Breakout Sessions

Case Study: Discussion and Conclusion

Chairman's Closing Remarks

Reception (Twelfth Floor Gallery, Main Complex, World Bank)

Dinner
Introduction: Michael Pomerleano, Lead Financial Specialist, Operations and Policy Department, World Bank
Keynote Speaker: Robert Pickel, Chief Executive Officer, ISDA

Day 4: Liquidity and Operational Risks

0900

Chairman's Opening Remarks

Regulatory Requirements of Models
Steve Sanderford, Banking Supervision and Regulation, Federal Reserve Bank of Richmond, Charlotte Branch

• What are the regulatory requirements of the risk management models used by banks?

• What incentives can be used to encourage banks to adopt risk management models?

• What systems are regulators already using?

Coffee Break

Understanding and Identifying Model Risk
Steve Allen, Managing Director, Risk Methodology, JP Morgan Chase

• Defining a good model, model risk, and model risk categories

• Overview of financial models and their model risk consequences

• The role of data

• The pitfalls of risk measurement models

• Examples of model risk—costs and causes

• Questions

Lunch
Keynote: Risk Management Challenges in the New MillenniumL From Measurement to Allocation and Beyond by John Gandolfo, Director of Quantitative Risk Analytics, World Bank

Liquidity Risk
Leonard Matz, Senior Vice President, Kamakura Corporation

• The nature of liquidity crises
  
  • Crisis prevention
    
  • Symptoms of a crisis
    
  • Creating a contingency funding plan
    
  • Potential crisis responses
    
  • Systemic liquidity risk
    

  • Developing country example(s)
    

• Measuring and managing liquidity risk
  
  • Liquidity policy and planning framework
    
  • The trend towards disintermediation
    
  • Alternative liquidity modelling techniques
    
  • Common liquidity metrics: strengths and weaknesses
    

  • Contingency planning
    

• Questions

Coffee Break

Operational Risk
Eric Rosengren, Senior Vice President, Federal Reserve Bank of Boston

• Introduction to operational risk
  
  • Need for clarification of definitions and methods
    
  • Regulatory proposals
    
  • Basel’s initiative
    
  • Role of capital charges
    
  • Role of risk mitigation
    

  • Outlining the four proposed approaches to measurement; Basic indicator approach, Standardized approach, Internal measurement approach, Loss distribution approach
    

• Effective management of operational risks in banks
  
  • Self assessment programmes
    
  • Risk indicators
    
  • Loss databases and data collection strategies
    

  • Statistical/actuarial models for operational risk
    

• Management reporting and controls
  
  • What does senior management need to know
    
  • Communicating the risk profile; risk mapping, traffic light systems, risk dashboards
    
  • Loss reporting
    

  • Capital reporting
    

• Questions

Aggregation of Financial Risk Factors
Lim Phang Hong, Director of Financial Risk Management, Monetary Authority of Singapore

• Implications of choosing internal models versus standard models
  

• How models exacerbate pro-cyclicality and market herding
  

• Incentives to reward enhanced risk management
  

• Aggregation of risk factors and handling of risk concentration
  

• Scenario analysis, stress-testing, and contingency planning by supervisors
  

• Critical issues: systems, stress-testing, incentives, senior management oversight
  

• Questions

Breakout Sessions

Discussion Teams to discuss and prepare presentations on "Plans for Action"

Chairman's Closing Remarks

End of Day 4

Day 5: The Risk Management Function

0900

Chair's Opening Remarks

Country Case Study: Korea First Bank—Risk Exposure and Risk Management (download 92 kb PDF of case study) (case is included in registration package with questions for analysis)
George Allayannis, Darden Graduate School of Business, University of Virginia

Coffee Break

Case Study: Breakout Sessions

Case Study: Presentations and Conclusion

Lunch

Panel Discussion: Challenges of Implementing and Supervising Bank Risk Management in Developing Countries (Country Experiences)

• Liliana Rojas Suarez, International Consultant and Chair of the Latin American Shadow Financial Regulatory Committee (moderator)

• Lim Phang Hong, Director, Financial Risk Management, Monetary Authority of Singapore

• Hennie van Greuning, Senior Advisor, Banking, Capital Markets and Financial Engineering, World Bank

• Craig Spielman, Vice President, JPMorgan Chase

• Ceyla Pazarbasioglu, Vice President, Banking and Regulatory Agency, Turkey

Coffee Break

Discussion Teams to Present "Plans for Action"

Course Evaluation

Chairman's Closing Remarks

End of seminar