Basel II & III Frameworks – Learning Roadmap

The principal message of the Basel II framework is Capital Adequacy. Basel II signaled a move away from a purely static regulator driven capital adequacy measure to an internal and relatively invasive assessment of the capital profile of a bank, called the Internal Capital Adequacy Assessment Process (ICAAP).

Under ICAAP requirements a bank needs to have in place internal procedures and processes to ensure that it possesses adequate capital resources in the long term to cover all of its material risks and the board is kept cognizant of any expected or projected capital shortfall.

Basel III introduces significant reforms to the Basel II networks primarily by setting out the supervisory framework for liquidity risk measurement via two minimum funding liquidity standards.

What are the prerequisites?

History behind the current capital adequacy requirement framework

To understand the current capital adequacy requirement framework we begin with an overview of the historical back ground behind the development of Basel II:

  • Basel II – Background: Great Depression, Regulation Q, Basel I
  • Basel II

What topics are covered?

Basel II and ICAAP

The following courses then address Pillar 2 of the Basel II framework- the Internal Capital Adequacy Assessment Process (ICAAP):

  • Internal Capital Adequacy Assessment Process (ICAAP) – Overview and Core concepts
  • ICAAP Sample Report Template

Basel III

Basel III is due to be fully implemented by 2019 and represents reforms to and strengthening of the existing capital requirement and liquidity standards. The following courses in turn review the revisions to the Basel II framework that Basel III encompasses as well as a detailed review of the liquidity reforms.

  • Basel III- Basel II framework revisions
  • Basel III- Liquidity Framework – Reforms to the Global Liquidity Risk Regulations
  • Basel III enhancement- Linking liquidity crisis with Liquidity Coverage Ratio and Stable Funding Ratios

What are the additional topics I can read up on?

Other courses related to Basel II, ICAAP and Basel III are:

  • Collateral Valuation in Credit Risk Management
  • Asset Liability Management
  • Liquidity Risk Management Case Studies
  • Setting Counterparty Limits, Market Risk Limits & Liquidity and Interest Rate Risk Limits
  • Calculating Value at Risk
  • Value at Risk Case Study
  • Duration and Convexity Example

Related Video Courses

  • Quant Crash Course
  • Calculating VaR (Value at Risk) using VCV and Historical Simulation
  • Setting Value at Risk (VaR), Stop Loss, Pre Settlement (PSR) and Counterparty Limits

Related PDF Files

  • ICAAP – Overview & Core Concepts
  • Calculating VaR – includes case study
  • Collateral Valuation in Credit Risk Management
  • ALM – Crash Course
  • Setting Counterparty Limits

Related EXCEL Files

  • ALM Crash Course – EXCEL Example (Examples include: Cost to close liquidity gaps, Cost to close interest rate risk, Earnings at risk, Market value of equity)
  • Setting Limits
  • ICAAP – Credit EXCEL Example
  • Calculating VaR – EXCEL Example
  • Duration Convexity Example


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