Overview/Description There is a constant battle between criminal and terrorist groups and global authorities around the movement of illicitly gained funds. Money laundering and terror financing are two of the most important regulatory issues that financial institutions, particularly global banks, must deal with. Various government initiatives worldwide have established strict rules on the transfer of funds and confirmation of fund sources and client identity. Sources in the industry estimate that many billions of dollars of illicit funds and funds used for terrorist activities change hands...

Overview/Description Banks and financial institutions are exposed to a number of credit, operational, and market risks. The three Basel regulations – Basel I, II, and III – adopted a rigorous approach in their attempt to provide a reliable and risk-managed operating framework. They require banks to maintain an adequate capital level at all times in order to cover their aggregate risk. A number of approaches are used for identifying and measuring risk, then planning the capital requirement for the bank based on that risk. This course provides an overview of various approaches used for capital...

Overview/Description When banks and other financial institutions offer loans, leases, and other credit related services, counterparty credit risk is arguably the most significant risk that they face. The Basel regulations, specifically Basel II and III, stress the need for a strong risk measurement and supervision framework and recommend banks follow one of two approaches. The first approach, called the standard approach, requires banks to use ratings from external credit rating agencies to determine minimum capital required to cover their credit exposures. In contrast to this simplistic...

Overview/Description Basel II proposed a sophisticated approach for determining capital requirements for credit risk, known as the internal ratings-based approach (IRB). The IRB approach is predicated upon a bank's internal assessment of its credit risk and is subject to strict data, validation, and operational requirements. When using the IRB approach, a bank also has to put a system in place that consists of four interdependent components: credit risk rating, quantification of risk ratings, data maintenance, and oversight mechanisms. Taken as a whole, these components present a framework...