Basel III impacts

Issues, developments and applications for banks

Course objectives

  • Understand the rationale, contents and impacts of the Basel III reform

  • Have a better comprehension of the structural impacts of Basel III on the international banking landscape

Introduction : Why did the crisis led to Basel III ?

  • The lessons of the 2008-2009 banking crisis
  • A reform dedicated to support financial stability and resilience
  • How to limit moral hazard and public support in the wake of the crisis?
  • Calendar and main milestones of the Basel III implementation

What is the Basel III made of ?

  • Rise of capital requirements for market risks
    • Stressed VaR
    • Incremental Risk Capital
    • Upgraded Back testing
    • Widespread stress-testing
  • Raising the quality of capital
    • A more selective definition of the capital base
  • The reduction of regulatory arbitrage: a new framework for securitisation
  • A more supportive capital base: less prociclycality (conservation and countercyclical buffers), better quality
  • Definition of new international liquidity ratios:
    • Liquidity Coverage Ratio
    • Net Stable Funding Ratio
  • Use of an additional non risk based ratio :
    • Leverage ratio

Case Study: Assessing the structural impacts of Basel III on the banks balance sheets and activities

Structural impacts of Basel III on the banking landscape

  • The reduction of the ROE of prop trading activities
  • The use of stressed market and liquidity risk measurement methodologies
  • A better handling of counterparty risk management in the post Lehman era
  • The evolution of market infrastructure in relation with Basel III :
    • Hedge funds
    • Central Counterparty Pools
    • A new positioning for OTC markets

Living in a systemic world

  • A specific treatment of systematically important financial institutions

Case Study: Understanding and implementing the new frameworks for market and liquidity risk management

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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