UNDERSTANDING ECONOMIC CAPITAL

Service Description

Course Objectives: • Develop a comprehensive understanding of economic capital and its role in risk management. • Gain insights into the methods of determining economic capital and its uses. • Learn how economic capital enhances risk assessment, stress testing, and risk management strategies. • Explore the alignment of economic capital with Basel Accord standards and regulatory compliance. • Understand the role of economic capital in assessing capital adequacy, capital planning, and regulatory engagement. Day 1: Understanding Economic Capital Fundamentals • Definition and Purpose: Unveiling the significance of economic capital in risk management. • Components of Economic Capital: Exploring risk categories contributing to economic capital. • Economic Capital vs. Regulatory Capital: Key differences and complementary roles. • Risk and Return Trade-off: Balancing capital requirements with profitability goals. Day 2: Determining Economic Capital • Quantitative Approach: Understanding the quantitative methods for calculating economic capital. • Scenario Analysis: Utilising scenario-based approaches for risk assessment. • Stress Testing: Assessing economic capital under extreme scenarios. • Risk Aggregation: Combining individual risk components to determine total economic capital. Day 3: Economic Capital in Risk Management • Risk Management Integration: Embedding economic capital in risk management frameworks. • Risk Appetite Framework: Aligning economic capital with risk appetite. • Capital Allocation: Allocating economic capital to business units based on risk profiles. • Portfolio Optimisation: Using economic capital to optimise risk-return profiles. Day 4: Economic Capital and Basel Accord Standards • Basel Framework Alignment: Understanding how economic capital supports Basel Accord requirements. • Adequacy of Capital Assessment: Using economic capital to assess capital adequacy. • Stress Testing: Incorporating economic capital into stress testing scenarios. • Risk-Based Capital Allocation: Linking economic capital to risk-weighted assets. Day 5: Economic Capital and Regulatory Compliance • Regulatory Reporting: Utilising economic capital information for regulatory reporting. • Capital Planning: Incorporating economic capital insights into capital planning strategies. • Supervisory Approval: Presenting economic capital findings to regulators. • Future Trends: Discussing the evolving role of economic capital in regulatory compliance.