Internal Capital Adequacy Assessment Process Training (ICAAP)

Key Capital Planning Tools for Banks

Overview

With the introduction of Basel II, the subject of economic capital has received much attention from regulators, bankers, credit and risk professionals, and academics. This Internal Capital Adequacy Assessment Process Training in Dubai UAE will provide delegates with an understanding of the most important concepts of economic capital requirements but will also highlight how and why this may differ from regulatory capital requirements.

This program seeks to inform delegates of the framework they will need to consider in the implementation of Basel II. The program will also examine some the long-term effects that may arise within the financial services industry

Course Objective

This course is designed to give attendees a practical guide as to what is an ICAAP, why it is required and what is its objective and most importantly how to go about formulating an ICAAP. It will enable attendees to understand the concept behind it and how it forms an integral part of a Bank’s capital planning.

  • Helps attendees learn how to formulate a Risk Appetite Statement
  • Understanding the role of stress tests in capital planning and how to undertake them
  • Allows attendees to understand how ICAAP contributes to a bank’s capital planning
  • Provides an approach on how to develop a financial model for ICAAP
  • Enables attendees to identify & undertake the components of an ICAAP
  • Understand the principal features of Basel II
  • Evaluate primary inputs into an economic capital model
  • Recognize the key differences between economic and regulatory capital requirements
  • Understand the objectives of capital adequacy regulation and the framework for its calculation 

Benefits

  • Those involved in a bank’s strategy and planning functions can gain insight as to how ICAAP can impact their work.
  • Those involved in the formulation of their institution’s risk management policies and procedures in the areas of credit, liquidity, asset-liability management, market risk and operational risk would benefit from seeing how their work contributes to an ICAAP exercise.
  • Internal auditors would gain the knowledge and understanding required to carry out their roles in an effective manner and assess the ICAAP’s adherence to the set laws and regulations and the adequacy of the methods used in carrying out the ICAAP process.

Course Contents

Introduction

  • Definition of ICAAP
  • Related Regulations (i.e. Basel)
  • Objectives of ICAAP
  • Basel II: review of architecture and key features
  • Credit risk measurement
  • Market risk: internal models, VaR, stress testing, scenario analysis, back-testing, enhancements
  • Operational risk: use of quantitative and qualitative inputs, frequency and severity of loss, risk and control self-assessments
  • Exercise: factors in determining capital levels
  • Group discussion: issues arising out of data collection, modeling and measurement of Pillar I risks

ICAAP Process and Methodology

  • Regulatory Capital vs Internal Capital
  • Present Capital Adequacy vs Future Capital Adequacy
  • The phases of ICAAP

Risks assessed by ICAAP

  • Pillar I Risks include Credit Risk, Market Risk and Operational Risk
  • Pillar II Risks eg. Liquidity Risk, Interest Rate Risk, Credit Concentration Risk, Reputation Risk, Strategic Risk

Risk Appetite Statement

  • Definition
  • Developing a Risk Appetite Statement

Qualitative Indicators

  • Risk Governance
  • Translation into Quantitative Impact

Quantitative Indicators

  • Developing the Base Case
  • Developing Gross Stress Cases
  • Application of Stress Test
  • Evaluating Net Stress Case

Consolidation Issues

  • Consolidation of Capital Requirements
  • Across the Group Stress Testing

ICAAP Governance

  • ICAAP Policy
  • Other Related Documents
  • Embedding ICAAP in the firm

ICAAP Submission Document

  • Suggested Format

Enterprise Risk Management

  • Introduction
  • ERM Implementation
  • Considerations and Challenges