Risk Management in Banks and the Capital Implications


The goal of this two-day workshop is to understand how risks are categorised, quantified, monitored and managed within banks. Specifically, participants will be equipped to:

  • Identify, categorise and quantify credit, market, liquidity, operational, legal, regulatory and reputation risks
  • Understand the systems and procedures needed to track, monitor and manage these risks
  • Have an understanding of how the bank’s capital is allocated to each of these risks from both a regulatory and management perspective.

Analytical Overview

The aim of this section is to introduce the inherent risks of a bank's balance sheet and the need for capital to cover these risks.


  • Why risk is inherent to a bank’s business model and therefore why effective risk management is critical
  • An overview of lessons learned from risk management failures and best practice in the identification, monitoring and management of the different risks faced by a bank
  • Value drivers and the business model of a bank
  • Differing perspectives: shareholders, regulators, debt providers.

Risk management

  • Identifying and defining major risk groups: credit, market, liquidity, operational, legal, regulatory, and reputation
  • Significance of risk groups for different banking businesses
  • Inter-relationship between key risk groups
  • Management objectives – risk vs. return
  • Lessons learned from recent risk management failures
  • Exercise: risk identification at a large bank.

Capital allocation

  • Definition of capital: expected and unexpected losses
  • Types of capital: shareholder, regulatory and economic capital
  • Regulatory capital
  • Definitions of Regulatory Capital; Core Capital, Tier 1/2
  • Structure of the Basel capital adequacy model
  • Basel II Structure: Pillars I, II and III
  • Economic capital and Economic Value Added (EVA)
  • Key assumptions, benefits and shortcomings
  • How management can use economic capital in the business
  • Managing capital structures: comparisons between banks
  • Case study: contrasting definitions of capital for a large international bank.