Learn How to take a Portfolio-Level Approach to Managing Your Bank's Credit Risk
With the recent onset of the global credit crisis and the growth of credit portfolio management, it is now more important than ever that you have the knowledge and skills to assess whether this approach is right for your bank. This popular RMA course will help you weigh the many benefits of credit portfolio management, determine the data you need and how to assess your sources, evaluate probability-of-default models, measure the risk contribution of an individual transaction, estimate the economic capital required to support a portfolio of credits, and take the first step towards a riskbased approach to profitability and pricing.
Workshop Overview
Participants have an opportunity to learn about a variety of portfolio management
issues and concepts, such as the importance of capital in an environment of change as
well as the many applications of capital that can add significant value in an institution's
decision-making processes. The program also covers data sources and portfolio models,
which are necessary for the establishment of an approach to credit portfolio management.
Who will benefit?
Senior credit portfolio managers and risk managers who:
- Want to move their organization toward a portfolio approach to measuring and managing credit risk
- Are rethinking the traditional credit process and examining various credit portfolio tools to implement strategically
- Seek intensive indoctrination into the quantitative world of portfolio management, including data, models, and concepts
- Want to understand the value proposition of an economic capital approach to credit risk and its applications
- Want to take the first step towards a risk-based approach to pricing and profitability
Following the Workshop, You Will
- Understand the technology, concepts, and practices associated with modern credit portfolio management
- Understand the major applications of credit portfolio management that help to make informed business decisions and add shareholder value
- Be able to think critically about the benefits and challenges of an effective CPM process at your institution
- Develop a clearer portfolio context in which to consider credit risk
Workshop Description
This two-day course will cover the following topics and incorporate hands-on exercises:
Evolution of Credit Portfolio Management
1. History of credit portfolio management
2. Evolution of different philosophies of credit portfolio management
- "Buy and hold"
- "We don't make bad loans"
- "Probabilistic"
- "Some loans will probabilistically go bad"
- Modern Portfolio Theory
- "Diversification and correlation are key
3. Basel II and its implications
- Regulatory overview
- Requirements
- Sensitivity of results
- Implications
Expected Loss Metrics for the Credit Portfolio
1. Expected loss parameters
- Probability of Default
- Loss Given Default
- Exposure at Default
2. Economic Capital Parameters
- Correlations
- Concentration
- Maturity
3. Portfolio loss distribution
- Key statistics
- Impact of parameters on the distribution
- Distribution types
Expected Loss Metrics for the Credit Portfolio
1. Expected loss parameters
Probability of Default
- Loss Given Default
- Exposure at Default
2. Economic Capital Parameters
- Correlations
- Concentration
- Maturity
3. Portfolio loss distribution
- Key statistics
- Impact of parameters on the distribution
- Distribution types
Exercise: Data Requirements for Building a Credit Portfolio Model
1. Probability of default
2. Loss given default
3. Exposure at default
4. Correlations
Dual Risk Rating Systems
1. Key Characteristics of a Risk Rating System
- Consistency
- Distribution
- Differentiation
- Usefulness
2. Predictive Variables
3. Building a Risk Rating System
4. Building a Risk Rating Process
Credit Portfolio Models
1. Uses of a portfolio credit model
2. Anatomy of a portfolio credit model
3. Drivers of portfolio credit risk
4. Common implementations of a portfolio credit model
Exercise: Credit Risk Models Workshop
1. Uncorrelated Binomial Model
2. Single Factor Gordy Model
3. Merton Model - Monte Carlo Simulation
4. Merton Model-based Conditional Binomial Model
Applications of Credit Portfolio Management
1. ALLL
2. Business/Product RiskAdjusted Return on Capital
3. Pricing and Profitability
4. Early Warning Indicators and Stress Testing
5. Concentration Risk/Limit Setting
6. Credit Default Swaps
About Your Workshop Leaders
Shahram Elghanayan ("Rami") is the Managing Director of the Analytical
Services group at ERisk. In this capacity, he is responsible for assisting
banks in using risk based concepts to make better tactical and strategic
decisions. This includes topics such as loss forecasting, capital adequacy
assessments, limit setting, portfolio optimization, relationship and customer
level pricing/profitability, risk rating systems, and incentive compensation.
About SunGard BancWare
SunGard BancWare is the leading provider of integrated risk solutions for the financial services industry that enable organizations to enhance their performance through better risk and capital management. Our mission is to help our clients transform the critical elements of their risk management processes with the goals of increasing decision-making effectiveness, reducing losses, and increasing shareholder value.
Workshop Schedule
On the first day registration begins at 7:30 a.m. and the workshop runs from 8:00 a.m. to 5:00 p.m. On the second day the workshop runs from 8:00 a.m. to 3:00 p.m.
RMA is not responsible for hotel accommodations, or the cancellation of them.
When registering please mention the RMA Credit Portfolio Management Workshop.
We encourage you to make your reservations early.
Registration fees
RMA members $1,495
Nonmembers $2,295