Liquidity Risk Measurement & Management

&An Intensive 3-day Course that Begins with Basic Concepts and Progresses to the Latest Methods for Liquidity Measurement and Management Uncover how to set-up and parameterize cash flow forecasts Learn about new FSA regulations as well as CEBS and BIS guidelines Review 5 case studies of recent liquidity crises Participate in an interactive scenario stress test / crisis management exercise Identify the key elements for a best practice liquidity policy Discover the key elements for best practice contingency planning Who Should Attend? Liquidity risk analysts Liquidity risk managers Treasurers, Group Treasurers, assistant Treasurers CROs Risk controllers ALM manager Internal auditors External auditors, and regulators
DAY 1 Welcome and Introduction What Went Wrong 2007-2008 Management Failures Measurement Failures Regulatory Failures Matz’s Liquidity Risk Rules Seven rules for bankers Three rules for regulators Measuring Liquidity Risk Cash flow forecasts Best practice liquidity risk measurement BIS Proposed net stable funding ratio BIS Proposed cash flow coverage ratio LUNCH Scenarios and Stress Levels Choosing scenarios -Choosing stress tests -VaR -A framework for scenario assumptions Practical Stress Testing General points Scenario assumptions and examples Developing Assumptions A framework Drivers and disaggregating the components Assumptions for deposits, loans and off-balance sheet volumes Data from previous liquidity events Basel III proposed “worst case” assumptions DAY 2 Group Exercise –Cash Flow Forecasting Testing Understanding Managing liquidity risk The big picture Managing Time Beyond Liquid Assets Liability diversification: The Good, The Bad and the Ugly Lessons from the 2007-2008 crisis Summary Mini Case Studies Alpha Bank Northern Rock IndyMac Bear Stearns BEA Wachovia Bank LUNCH Liquidity Contingency Risk Plan objectives and administrative requirements Key risk indicators Invocation and escalation Defining scenarios Scenario duration Defining severity Indentifying and estimating secondary sources Linking to stress testing Internal and external communication Event management committee Roles and responsibilities Plan testing Effective Risk Governance Risk appetitive -Risk strategies -Risk limits -Building a Better ALCO and sample ALCO agenda -Requirements for Effective ALCO -Contents of best practice liquidity risk policy -Best practice risk reporting (internal and external) -Risk management oversight -The role of audit in risk management DAY 3 Testing Understanding Liquidity Risk Pricing Introduction to FTP Pricing goals Pricing for mismatch liquidity risk Pricing for contingent liquidity risk BREAK Basel III Net stable funding ratio Cash flow coverage ratio LUNCH Funding Disruption Simulation – interactive class exercise