Bank Modelling & Analysis

Course Overview:

This course covers the key elements of modelling the activities of a commercial bank, including retail banking, consumer lending and credit cards, commercial banking, investment banking and asset / wealth management operations.

Participants will be introduced to the broad regulatory themes and challenges facing the financial services industry and an overview of the banking system the regulatory environment. The course will allow participants to understand the role of credit rating agencies and how the Basel II compliance requirements effect bank regulation, including minimum capital requirements, the supervisory review process and the market discipline elements of Basel II.

The course will allow participants to calculate risk-weighted assets, tier one and tier two capital and to model a bank income statement using the balance sheet as a driver.

Participants will build an integrated financial statement forecast model, projecting asset and liability balances, interest rates and spreads for key assets and liabilities, using industry best practices. Real-world case studies and financial filings will be used to extract key information. Participants will learn industry-specific forecast methodologies and apply them in a financial model.

Case Study: The participants will use a variety of case studies and exercises during the two days, based on publically quoted and generic companies.

Participants will be required to bring a laptop and a calculator to the course.

Course Content:

Commercial banks and the regulatory framework

• Overview & of the banking system & regulation
• Understanding the role of credit rating agencies
• Basel II compliance and its effect on bank regulation

a) Pillar I: minimum capital requirements

b) Pillar 2: supervisory review process

c) Pillar 3: market discipline

• Bank’s internal rating systems
• Calculating risk-weighted assets
• Calculating tier one and tier two capital

Case Study I: Participants model risk-weighted assets and tier one and tier capital for a case company

Building a financial institution forecast model

• Sourcing information – historic and forecast data
• Key elements of a bank model
  • The balance sheet as a driver
  • Key elements of the income statement
  • Determining economic drivers for different types of banks

Case Study II: Participants are introduced to the bank forecasting model and review its structure, linking up the balance sheet and income statement

 Modelling different banking activities

• Overview of the key activities in a  commercial bank
• Modelling the core activites: determining the key drivers
  • Retail banking
  • Consumer lending and credit cards
  • Commercial banking
  • Investment banking
  • Asset / wealth management
• Incorporating core activities into the income statement and balance sheet

Case Study III: Participants build out the case company model incorporating the various core activities into the model

Further issue to consider in a bank model

• Debt service and income as operating or financing expense
• Regulatory constraints on reinvestment and implications on growth
• Projecting cash flows
• Incorporating regulatory constraints into the model
• Dealing with regulatory capital  ratios
• Calculating minimum capital adequacy

Case Study IV: Participants complete the case company model incorporating a cash flow forecast and various regulatory ratios

Auditing the model and further analysis

• Balancing the model and checking for accuracy
• Error-proofing techniques & sensitivity analysis
• Ratio analysis – the key efficiency, operating and financial ratios for a bank

Case Study V: Participants build error proofing techniques into the case company model and produce efficiency, operating and financial ratios for the case company

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.