Basel 3 Impact on Banks

What is at stake and roadmap for application

Course objectives

  • Understand the limitations of previous regulation and the rationale for Basel 3
  • Main developments with Basel 3
  • Structural impact for banks

Introduction : rationale and objectives for Basel 3

  • Lessons from the 2008 financial crisis
  • Make the financial system more resilient
  • Limit moral hazard and state intervention
  • Roadmap progress to Basel 3

Content of Basel 3

  • More capital:
    • Stressed VaR
    • Incremental Risk Capital
    • Enhanced back testing
  • Better capital:
    • Solvency ratios new constraint
  • New limitations on regulatory arbitrage with leverage ratio and securitization framework
  • Stable capital with countercyclical buffers
  • The introduction of new liquidity ratios
    • Liquidity Coverage Ratio
    • Net Stable Funding Ratio

Case Study: measuring the impact of Basel 3 on banks' balance sheet

Structural impacts of Basel 3

  • Penalizing bank proprietary trading
  • Market and liquidity stress tests
  • Better accounting for counterparty risk in the post-Lehman world
  • Markets require more high quality collateral and capital
  • Structural market changes
    • Hedge funds
    • Central Clearing platforms and trade repositaries
    • OTC dealing • Living with systemic risk

Case Study: understanding market and liquidity risk

- Solvency ratios calculation (CET1,…)

- Analyzing global liquidity ratios

Accelerating on the road to Basel 3

  • Content and impact of EBA decisions in December 2011
  • Imact on bank financial statements
  • How LTRO fit into the picture
  • The new treatment of sovereign risk
  • Banking Union and Asset Quality Review

Tigrane Kibarian

Tigrane Kibarian

Tigrane, a graduate of ESSEC and Warwick Business School, began his career in auditing at Arthur Andersen before joining General Electric - Energy Division - in corporate finance, working on industrial, regulatory and M&A assignments in France and Italy.
He joined Goldman Sachs in London, first as COO in the Equities division and then as VP on the institutional portfolio restructuring desk, working on ALM and cross-asset allocation issues.
He made a transition to asset management by becoming Global Macro portfolio manager at Odin Capital, before becoming its COO. After this experience, he founded Zentak Capital with a partner to offer institutional clients a volatility arbitrage strategy.
He has been working in training for 10 years, as a trainer and also in charge of CIB-AM clients for Bärchen. Tigrane is Lean Six Sigma and FCA certified.

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