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Risk Management in Banks

Program Credit : PGPM : 3 Class of Sessions : 2012 : 30

Course Code : SL BK 601

AIM
The course aims to identify, measure risk faced by Banks and study the risk management tools & techniques for managing risk

LEARNING OUTCOMES
At the end of the course, students will be able to: 1. Analyze international best risk management practices in Banks 2. Define the various sources of risk and its impact on risk management practices in Banks 3. Compare and contrast various risk tools & techniques used in Banks for managing risk 4. Demonstrate the use of risk management framework and strategies in measuring and managing risk in Banks. 5. Evaluate enterprise- wide risk management process in Banks 6. Implications and impact of Basel-norms

REFERENCE BOOKS Risk Management in Banks Risk Management, 1st e Risk Management in Banking, 2 e Financial Risk Management Risk Management Managing Bank Risk Asset Liability Management Analyzing & Managing Banking Risk, 3rd e Risk management Theory and practice of treasury and risk management in Banks Credit risk management. Risk Management in Indian Banks Risk Management and shareholders value in Banking
nd

PUBLICATION / AUTHOR IUP Crouchy, Michel et al. McGraw-Hill - 2005 Bessis, Joel. John Wiley and Sons - 2002 Edinburgh Business School Verma, S B. Deep & Deep Publications Glantz, Morton. Published by Academic Press - 2002 Kumar, T Ravi. ICFAI Vision Series Geuninig, Hennie Ban / Brdjouce, Sonja. The World Bank - 2009 IIBF Mumbai taxman publications IIBF. Taxman Bidni, S. K. / Mitra, P.K. Taxman Dr. Bhattacharya. Himalaya Publishers Andrea Risti and Andrea Sironi, John Wiley & Sons,2007

Detailed Syllabus Introduction to Risk Management: What risk is all about; Basic Purpose of Risk Management in Banks; The process of Risk Management; Different Types of Risks in Banks; Overview of Enterprise-wide Risk Management in Banks. Asset-Liability Management in Banks: Need for macro- and Micro-level Asset-Liability Management; Role of Asset-Liability Management Committee; The Asset-Liability Management process; Asset-Liability Management and its Purpose; Regulatory prescription for Asset-Liability Management Managing Credit Risk: Drivers of Credit Risk; Credit Rating; Capital Adequacy Requirements; BIS Risk-Based Capital Requirements Frame Work; Traditional Measurement Approaches; Different Models of Credit Risk. Importance of Credit Appraisal & Monitoring in managing credit risk. Managing Market Risk in Banks: Risk and Sources of Risk; Measuring Risk and Value-at-Risk (VaR); Approach to VaR; Types of Risk; Indian Scenario. Impact of Market Risks on Banks performance Types of market risks Managing Liquidity Risk: Liquidity Risk and the Need for Managing it in the Long/short Run; Fundamental Approach to Long Run Liquidity Risk Management; Technical Approach to short Run Liquidity Risk Management; Factors Influencing Investment- Borrowing Decisions. Importance of cash management in banks. Managing Interest Rate Risk: Types of Interest rate risks; Gap Methodology; Duration Analysis. Managing Foreign Exchange Risk: Nature and Magnitude of Exchange risk; Tools and Techniques for Managing Forex Risk; Managing the currency risk; Futures, options and swaps; Case study on Enterprise Risk management of BNP- Paribas

Operational Risk Management: Operational Risk and Its Evolution; Major Sources of Operational Risk; Measurement of Operational Risk; Management of Operational Risk. Risk Management Frame work in Banks: Enterprise wide Risk Management in Banks; Elements of Risk Management Frame work; Systematic Risk Management in Banks; Different Measures of measuring Risks; Involvement of the management in the Risk Management Frame work. Risk Management Tools: Tools and Techniques for Managing Credit Risk, Forex Risk, Interest Rate Risk, Market Risk Derivatives in Banks: Futures in Banks and Different Types of Futures; Options in Banks and Different Types of Options; Swaps in Banks and Different Types of swaps; Use of the Derivative Products. Credit Derivatives; Mortgage Guarantee Companies. Risk Management Strategies: Operational Risk Management Strategies; Financial Risk Management Strategies; Systematic Risk Management Strategies; Risk Limitation; IT Implementation Challenges. Outsourcing of services by banks, risks in outstanding safeguards to be taken by banks, RBI directives to banks. Enterprise-Wide Risk Management in Banks: The Necessity of ERM; The Process of ERM; Measurement of ERM; Transfer Pricing; Cases in ERM. The New Basel Accord- Implication for Banks: Basel II Frame Work- The Three Pillar Architecture; Organizations Affected by Basel II; Impact of Basel II. On Capital Adequacy Regulatory Guidelines. Updated Jume,2006 Basel guidelines from www.bis.org/publ/bcbsca.htm

Suggested Schedule of Sessions Topic Introduction to Risk Management Asset Liability Management in Banks Managing Credit Risk No. of Sessions 2 3 3

Managing Market Risk Managing Liquidity Risk Managing Interest Rate Risk Forex Risk Operational Risk Risk Management Frame work in

3 2 2 2 3 3

Banks Risk Management Tools Derivatives Risk Management Strategies Enterprise Wide Risk Management The New Basel Accord Total 2 2 2 2 3 30