PART I – THEORETICAL BACKGROUND: THE BENEFITS AND COSTS OF BANK CAPITAL
The role of equity in a bank’s financing structure.
Leverage, risks, and profitability of banks.
Effects on the supply of lending from regulatory capital ratios.
Quality of regulatory capital instruments and loss-absorbing capacity.
Prudential rules on bank capital adequacy and banking crisis management.
PART II – BASEL CAPITAL FRAMEWORK AND ITS IMPACT ON MANAGEMENT AND PERFORMANCE OF BANKS
Main drivers of the risk-density ratio. Standardized and internal methods and models.
From capital charges to risk-weights.
Capital requirement for market risks.
Capital requirement for operational risk.
Credit risks: expected and unexpected losses. Accounting and prudential loan loss provisioning.
Standardized and IRB approaches for credit and counterparty risk.
Prudential treatment of NPLs.
Procyclicality of regulatory capital requirements. The different strategies that banks can use to modify their capital ratios.
Relevance of bank business models and their profitability.
Macro-prudential approach of Basel 3
Capital buffers and the maximum distributable amount.
Leverage ratio and risk-weighted capital ratios.
The problem of the undue variability of bank RWAs and Basel 4 reforms.
The II Pillar capital requirements in the Single Supervisory Mechanism. Some empirical data.
Capital allocation to bank business lines and risk-adjusted performance measurement.
The impact of bank capital management and regulation on profitability. Prudential challenges of weak profitability of banks.