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Early Warning Signals in Banks

A two-day masterclass for experienced analysts offering an insight into the causes and early warning signals of credit deterioration and failure in banks. The workshop contains both local and international cases of distress to identify common themes and financial, non-financial and market indicators.

Course Objectives

This two day intensive workshop will provide a structured approach for identifying early warning signals in financial institutions. The aim is to equip participants with the knowledge and skills to proactively:

  • Understand the causes and symptoms of both systemic and individual bank failure in the global financial crisis
  • Anticipate and quantify the vulnerability of institutions to liquidity and refinancing risk
  • Stress test solvency for write downs from credit, trading, investment and derivative positions
  • Differentiate qualitative, quantitative and market indicators of credit deterioration
  • Identify the likely triggers or events which would change the credit standing of a company in the future.

Target Audience

Experienced credit risk and fixed income professionals with a good understanding of the analysis of financial institutions. This workshop follows on from our intermediary level workshops: Intensive Bank Analysis, Emerging Market Bank Analysis and Non-Bank Financial Institutions. Advanced Bank Analysis: is a complementary advanced level workshop which drills down into the financial statements of banks with complex activities and accounting practices.

Content

ANALYTIC OVERVIEW
Signs of distress
  • Common themes in troubled financial institutions: excessive growth, over-concentration, volatile earnings sources, asset and liability mismatches, dependence on unstable funding
  • Symptoms of a company's deteriorating credit standing: financial, non-financial and market indicators.
Structured analytic approach
  • Four step approach to focus on key issues: purpose, payback, risks and structure
  • Purpose of the exposure and sources of payback: importance of refinancing in financial institutions, challenges to downsizing assets and availability of external support
  • Risks to repayment: Identify the key macro, sector and company specific business and financial risks which might jeopardise repayment
  • Structure: conclude on appropriateness of the facilities, assess the level of protection and critique the pricing to assess the risk: return.
Case study:

Institution expanding aggressively without a strong deposit base. Lessons learned from the origins of the crisis.

OPERATING ENVIRONMENT

Key macro economic and sector trends, which are likely to erode creditworthiness.

  • Systemic risks within a financial system: macro variables, competitive pressures, shadow banking system, quality of regulation and supervision
  • Support for the banking system: too big to fail or too big to rescue?
  • Origins of the credit crunch: sub-prime, structured finance (MBS, CDO, SIVs and ABCP), leveraged loans, dependence on interbank and etc.
  • Key market risks: including funding problems in the Eurozone and other countries, commercial real estate exposures in Europe and the US
  • Potential impacts of forthcoming regulatory changes: Basel III, Dodd-Frank.
Case study:

Stressed countries and banking systems.

MANAGEMENT AND SHAREHOLDERS

This section will focus on comparing management responses to a challenged sector.

  • Companies in crisis: recognising weak management and lack of integrity
  • Risk management challenges: liquidity, reputation, operational risk
  • Disclosure and corporate governance concerns
  • Inter-group support: ability of a stressed parent company to support subsidiaries.
Case study:

A failed investment bank.

BUSINESS RISK

This section will focus on companies with challenged business models and companies in crisis.

  • Credit risk: asset quality in the loan book; excessive growth and concentrations, hidden impaired loans; using surveillance reports to anticipate credit risk problems
  • Market risk: stress and back testing VaR indicators, acceptable levels of exposure to structural interest rate and FX risk
  • Derivatives: hidden credit and market risks; appropriate exposure levels
  • Performance risk: assessing earnings volatility.
Case study:

Bank failures due to exposures to credit risk, trading and investment losses, derivatives and structural interest rate risk.

FINANCIAL RISK

This section will focus on the stability of a company's funding structure and the ability to withstand solvency and liquidity crises.

  • Assessing the diversity and stability of funding sources: refinancing risk: quantifying liquidity and financial flexibility
  • Asset and liability management concerns: FX, interest rate and maturity mismatches
  • Liquidity risk management: managing and stress testing transaction and funding stability
  • Securitisation vehicles: liquidity exposure to conduits, servicing rights and other residual interests, sub-prime risks
  • Double leverage: challenges of a leveraged holding company
  • Solvency: stress testing quality and adequacy of capital to withstand write-downs.
Case study:

Continuing pressures on funding for banks, off balance sheet exposures and stress testing inadequate capitalisation.

Workshop Times

Below are typical timings for our courses; upon registration we shall advise you if these have changed.

Breakfast: 8.30am
Course Start: 9.00am
Course End: Between 5.00pm and 5.30pm
Lunch starts between 12.30pm and 1.00pm, and lasts no longer than 1 hour.
Short breaks of 10 - 15 minutes are taken mid morning and mid afternoon.

Please make your course selection
Dubai -
Date to be confirmed
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Frankfurt - £1,850 + 19% VAT
29 - 30 March, 12
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London - £1,850 + 20% VAT
11 - 12 June, 12
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New York - US$2,800
Date to be confirmed
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Singapore - US$2,800
5 - 6 July, 12
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The majority of Fitch Training programmes are offered at an intermediate and advanced level. There are no specific prerequisite courses to attend our programmes, however some topic knowledge maybe required. Please refer to the target audience on the course page for more details.

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NASBA

The majority of Fitch Training programmes are offered at an intermediate and advanced level. There are no specific prerequisite courses to attend our programmes, however some topic knowledge maybe required. Please refer to the target audience to see what level of prior knowledge is required for a specific course.

The pre-course reading materials will be sent to each participant in preparation for their attendance on the course.

Client Comments
"Great for pointing out/highlighting areas which we should drill down into. i.e.not just rely on financial reports."
- Sarah Harrison
- Newline Underwiting Management
Previous Step Training
People often attend:

Emerging Market Bank Analysis

Intensive Bank Analysis
Alternative Courses
This course covers lots of recent failures and the learning from them. In emerging markets, the equivalent workshop is Early Warning Signals in Banks. We also run Advanced Bank Analysis which is more suited to those analysing large complex, global banks. It focusses on just one case study in great depth.
Banks Learning Path

Banks Learning Path