Credit Risk Management

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Duration 3 days – 21 hrs

 

Overview.

 

The Credit Risk Management Training Course is designed to provide financial professionals with a comprehensive understanding of credit risk management, covering key areas such as borrower risk assessment, loan structuring, credit portfolio management, and the management of non-performing loans (NPLs). Participants will also gain insights into regulatory frameworks, including Basel III requirements, and develop practical skills in stress testing and recovery planning.

 

Objectives

 

  • Understand fundamental credit risk concepts and their importance in financial institutions.
  • Apply credit risk measurement models to assess the probability of default (PD), loss given default (LGD), and exposure at default (EAD).
  • Develop effective loan structures and risk mitigation strategies to minimize exposure.
  • Manage credit portfolios effectively by identifying diversification opportunities and controlling concentration risks.
  • Understand and implement Basel III requirements for credit risk and capital adequacy.
  • Conduct stress testing for credit portfolios to evaluate the impact of economic downturns.
  • Develop strategies for managing non-performing loans (NPLs) and implementing recovery plans.
  • Prepare recovery and resolution plans to ensure financial stability during times of distress.

Audience

 

  • Credit Risk Managers: Professionals responsible for the oversight of credit risk in banks and financial institutions. This course will enhance their ability to implement and manage effective credit risk strategies.
  • Loan Officers: Individuals who assess and approve loans for corporate and retail clients. They will benefit from learning how to apply credit risk models, structure loans, and reduce exposure to default.
  • Credit Analysts: Analysts who evaluate the creditworthiness of borrowers and assess the risk associated with lending. This course will provide advanced tools for risk measurement and analysis.
  • Portfolio Managers: Professionals who manage credit portfolios, ensuring balanced risk across loans. They will gain insights into credit portfolio management techniques and risk mitigation strategies.
  • Risk Management Officers: Professionals tasked with identifying, analyzing, and mitigating risks in financial institutions. This course will enhance their knowledge of Basel III requirements and stress testing for credit risk.
  • Compliance Officers: Individuals responsible for ensuring that their organization complies with regulatory standards, including Basel III and other credit risk-related guidelines.
  • Corporate Bankers: Relationship managers and bankers involved in structuring credit solutions for corporate clients. This course will provide valuable insights into borrower risk assessment and loan structuring.
  • Internal Auditors: Professionals auditing credit risk policies and procedures. They will benefit from understanding how to evaluate the effectiveness of credit risk management frameworks.
  • Asset and Liability Managers (ALM): Managers responsible for maintaining a financial institution’s balance sheet, especially with regard to credit risk exposure and managing liquidity risks.
  • Senior Executives in Risk Management: Executives involved in high-level decision-making around risk management strategies, including credit risk policies, risk appetite, and capital adequacy.
  • Banking Consultants and Advisors: Consultants advising financial institutions on credit risk management strategies, loan structuring, and compliance with regulatory requirements.
  • Financial Regulators: Regulators who oversee credit risk practices in financial institutions and ensure adherence to national and international guidelines, including Basel III.

Pre- requisites 

  • Basic understanding of risk management principles.
  • Experience in banking operations, finance, or risk-related roles.
  • Professionals currently involved in or transitioning to operational risk management roles.

 

Course Content

 

Introduction to Credit Risk Management

 

  • Definition of credit risk and its significance in financial institutions
  • Overview of key concepts: risk assessment, loan structuring, and NPL management
  • The credit risk management process

 

Credit Risk Measurement Models

 

  • Overview of quantitative and qualitative credit risk models
  • Probability of default (PD), Loss given default (LGD), and Exposure at default (EAD)
  • Credit scoring and rating models for individuals and businesses
  • Internal ratings-based (IRB) approaches
  • How to apply credit risk models in lending decisions

 

Loan Structuring and Risk Mitigation Techniques

 

  • Principles of loan structuring to minimize risk
  • Types of loan products and their risks (e.g., corporate, retail, SME loans)
  • Use of covenants, collateral, and guarantees
  • Techniques for minimizing risk during the loan origination process

 

Credit Portfolio Management

 

  • Fundamentals of portfolio risk management
  • Diversification and concentration risk
  • Managing credit risk across different sectors and geographies
  • Tools for monitoring and controlling credit portfolio risk

 

Basel III Requirements for Credit Risk

 

  • Overview of Basel III framework and its implications for credit risk management
  • Minimum capital requirements and credit risk capital charge
  • Credit risk mitigation techniques under Basel III
  • Importance of risk-weighted assets (RWA) and leverage ratio
  • Capital buffers and liquidity requirements

 

Stress Testing for Credit Risk

 

  • What is stress testing, and why is it essential for credit risk management?
  • Methods for conducting stress tests on credit portfolios
  • Scenario analysis and sensitivity analysis
  • Assessing the impact of economic downturns on borrower default rates and credit losses
  • Regulatory requirements for stress testing under Basel III

 

Dealing with Non-Performing Loans (NPLs)

 

  • Causes of non-performing loans and early warning signals
  • Strategies for managing and reducing NPLs
  • Loan restructuring and workout strategies
  • Legal considerations in dealing with NPLs
  • Best practices for NPL recovery

 

Recovery and Resolution Planning

 

  • Understanding the importance of recovery and resolution planning
  • Key elements of an effective recovery plan
  • Resolution tools and strategies for distressed financial institutions
  • The role of regulators in resolution planning
  • Case studies: successful recovery and resolution planning in the Philippines banking sector
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