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GERF2111 - Credit Risk Management
Credits :
6
Lecturer :
Mode of delivery :
Face-to-face , second term, 30 hours of theory.
Language of instruction :
Courses delivered in French or in English, Powerpoint support in English
Learning outcomes :
To enable students to understand best practices, challenges and trends in credit portfolio management in various types of financial institutions in the European regulatory environment.
Prerequisites :
None
Co-requisites :
None
Course contents :
Part 1 / Theories of Credit Portfolio Risk Management
o Introduction : Basics of Risk, Capital and Value Creation
o Measurement of credit risk : per loan (PD, EAD, LGD) and at portfolio level (interconnections, correlations), values PIT vs TTC
o Measurement of risk-adjusted profitability (RAROC, hedging cost)
o Concentration risks: Difference between event and systemic risks, principles to establish the risk appetite (CaR, EaR, LaR)
o Active management of credit portfolios, to optimize value within risk appetite constraints: steps, objectives, metrics and benchmarks, market instruments (CDS, securitizations)
o Counterparty risk in treasury and trading (derivatives, treasury and investment products): contracts, exposure measurement, risk mitigation (close-out netting, CSA, break clauses, etc.), real time management systems, Central Clearing Counterparties
o Organizational options for credit portfolio management, links with treasury and ALM for an integrated balance sheet management
Part 2 / Regulatory developments
o Organization for Financial Stability and Financial Markets control globally and in the EU
o Basel 3 / CRD 4 (Banks)
o Solvency II (Insurance)
o Comparison of prudential regulations, approach for "Shadow Banks" regulation
o Impact on business model of financial institutions and on distribution of credit products
o The future Capital Markets Union
Part 3 / Case study - The financial crisis of 2007-2008
o Analysis of root causes and consequences of each stage of the crisis
o Critical analysis of new prudential regulations effectiveness
o Implications for economic growth and role of banks and institutional investors
Planned learning activities and teaching methods :
Presentation and multiple practical examples.
Assessment methods and criteria :
Written examination (3h) in French, Dutch or English, on the main concepts and practices presented during the courses; sessions in June and in September.
Recommended or required reading :
No recommended reading
Other information :
Classromm mode, 30 hours - 6 ECTS
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