Course Overview

A two-day masterclass for experienced analysts offering an insight into the causes and early warning signals of credit deterioration and failure in financial institutions.

The workshop contains both local and international cases of distress in banks, broker dealers and finance companies to identify common themes and financial, non-financial and market indicators of deterioration.

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 current 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.

Course Content

Day 1

Creating Real Bank Analysis.
Generic Typology of Banks.
A step by step guide to a Banks Balance sheet, Profit and Loss account and introduction to cash flows.
Utilising Ratios for :- Capital Adequacy, Typology and Quality using Basle guidelines.
(ii) The principal ratios of Asset Quality
(iii) Principal and Secondary lines of liquidity.
(iv) The utilisation of the Money Markets.
(v) Depositor behaviour and confidence
(vi) Profit Margin, Returns on Equity and Assets.
(vii) How flexible is the Bank? A range of ratios to test the bank’s ability to move their products in line with market conditions effectively.
Analysing New Banks with Case Studies
Developing Cost/Income and Efficiency Ratios
Earnings Analysis Trail

Cash Flow Analysis

Discussion on the Bank’s main income sources and their impact and use as an early warning signal.
Earnings Analysis Trail
Non performing loans and provisions
Speculative practices and their detection
Highlighting organisational risks.
Sustainable growth rates….are we reviewing a going concern?
Operating Expenses and their management.
The Quality and Riskiness of earnings.
Growth as strategic policy and out of control.
Direct and Indirect Cash Flows.
Cash Flow Ratios including:-
Ratios to assess the ability to generate future earnings, the reliance on outside sources as financiers for a riskier growth analysis, Mandatory and Discretionary Cash Flows.

Problem Recognition
Credit Culture
Credit Process
Delegation of Authority
Team Effort
Accountability vs Blame
Real life examples

Day Two

Early Warning Signals
Financials
Industry Trends
Promoter Losing Focus
Discusses Scam deals
Bank Guarantee Structures etc
Key people leaving
Senior Management to take views on Industry wide recession and Sector related issues.(Early bird catches the worm.)

Events of Default
Potential Event
Covenant Breach
Mark to Market
Stress Testing
Portfolio Analysis

Reaction to Default
Facing up to the situation
Syndicated Loan
Multi Banked Loan
Multi layered relationship for eg Equity, Underwriting and Lending
Knee jerk or going by the book results in greater damage

Different approaches
Good Bank - Bad Bank
Credit takes over -disastrous
Marketing guys forced to continue
Team discussion to arrive at best approach in these scenarios. Interactive session based on the participants experience and knowledge of how their company deals with problem loans

Preparation for Legal Battle
Legal Independent Audit
Mock Trial - worth the cost
Prepare before war
Maintain one window of communication only
Choice of Lawyers - In-house Legal hurdles

PDF of course outline - Please note that tailoring is possible


IF YOU HAVE ANY QUESTIONS ABOUT THIS SEMINAR PLEASE WRITE TO US AT post@redcliffetraining.co.uk

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