Basel III – The Regulatory Challenges Ahead

Start Dates: TBC

Location: Virtual

Full Fee: €600

Network Members Fee: €350 Book Now

Programme overview

The Basel accords have a significant impact on the way banks are run. Basel III is designed as a centrepiece response to the difficulties experienced in the banking sector during the financial crisis. It’s goal is to make financial institutions safer, particularly by increasing capital adequacy requirements.

The programme provides a practical insight into how Basel III changes the nature of previous capital adequacy regimes. It also examines other areas addressed by Basel III, such as new liquidity standards, leverage rules, and systemic risk.

Learning outcomes

Following this course participants will,

  • Know the history of the Basel accords.
  • Understand the requirements of Basel 2.
  • Understand the changes caused by the Basel 3 accord in theory and in practice.

Who is the course for

Banking staff, including Risk, Operations and IT that need to understand the impact of Basel III and be able to implement changes and solutions.


Introduction to Basel Norms

  • Brief History
  • Basel Committee – its main goals
  • Overview of Basel I,
  • Overview of Basel II
    • Pillar 1 – Minimum Capital Requirements
    • Key Changes in Pillar 1
    • Pillar 2 – Supervisory review process
    • Pillar 3 – Disclosures

The 1988 Accord vs. the New Accord

Perspectives on capital: regulatory, supervisory, market and management

  • Accounting or common capital
  • Economic capital: internal management assessment of unexpected loss
  • Supervisory approach: role of capital in overall regulation
  • Development of Basel Accord: I, II, II.5 and III
  • Lessons learned from the global financial crisis applied to regulatory capital adequacy
  • Structure of the Basel II and III Accords


Regulatory Capital Allocation

The goal of this section is to give an understanding of the main techniques used to calculate regulatory capital under Pillar I of the Basel 2/3 accords, and give an update of the latest regulatory changes.

Credit Risk

  • Identifying types of credit risk and those which require specific pillar I capital allocation
  • Standardised approach, Internal ratings based approaches
  • Credit risk: key elements – probability of default and loss given default; on and off balance sheet exposures and derivatives.
  • Capital treatment for specific types of exposure under Basel II/III
  • Derivatives; current exposure, standardised and advanced approach.
  • Basel III changes to counterparty risk measurement including Credit valuation adjustment (CVA)
  • Contingent exposure: Credit conversion factors for exposure at default under the Standardised/FIRB approaches. Challenge of EAD for AIRB approach. Changes to contingent liquidity obligations under Basel II.5

Case study: CDO’s and MBS: Regulatory Capital Arbitrage


Market risk

  • Standardised approach to market risk
  • Model based approaches: VaR models
  • Rationale for capturing credit risk in the trading book
  • Credit risk migration in the trading book
  • Rule changes for correlation trading
  • Operational risk
  • The challenge of allocating/quantifying capital for operational risk
  • Basic indicator and Advanced Management Approaches
  • Minimum regulatory standards for AMA
  • Typical quantitative and non-quantitative methods applied under AMA
  • Comparison of operational risk capital levels across global banks.



Review of the definitions of bank capital under the Accords and the key characteristics which determine the classification of capital. Particular focus will be given to the changing requirements for bank capital under Basel III.

Core capital

Other Tier One capital

Tier two capital


Leverage Ratio

  • Proposed Basel III leverage ratio
  • Existing leverage ratio requirements (e.g. USA Canada, Switzerland)
  • Impact of accounting treatment on leverage ratios
  • Potential implications of leverage ratio on volatile balance sheet exposures, trade finance and off-balance sheet positions.






  • General treatment of liquidity under Basel II/III
  • Principles for sound liquidity management: stress testing, contingency planning, risk tolerance, liquidity pricing etc.
  • Liquidity risk tolerance (Basel Principle 2) given different business models, e.g. retail and wholesale banks, multi-nationals and investment banks
  • Strategies, policies and practices (Basel Principle 3)
  • Liquidity costs, benefits and risks (Basel Principle 4)
  • National regulators individual approaches to liquidity management
  • The Liquidity Coverage Ratio: Calculation guidelines and worked example applied to a large international bank

Trainer Profile

Peter Leahy

Peter specialises in the fixed income and fixed income related capital markets, including derivatives, repo and swaps.

Peter was, until 1995, a Senior Vice President at a Bear Stearns in London where he was responsible for developing and selling Asset Backed and Derivatives products. He has worked in the financial markets for more than fifteen years and advises various institutions at the highest level on matters concerning the international capital markets. His extensive experience includes senior fixed income markets positions at J.P. Morgan, Kleinwort Benson and Bear Stearns.

Peter has been contracted on numerous occasions to act as a discussion facilitator for internal discussions and ‘town hall’ meetings within major Investment Banks.

Peter also has also gained considerable experience on the documentation of mortgages and fixed income products, as a teacher and an expert witness, including a recent high profile bond sales professional negligence cases involving CDOs and defaulted bonds.

Peter has trained courses in about twenty countries on topics including Swaps, Credit Derivatives, Securitisation and Structured Products. Peter has presented many public training programmes on Credit Derivatives and on Securitisation. He is also a visiting lecturer at the City University Business School (London).

Banks that have used Peter’s services include HSBC, CSFB, Citigroup, Merrill Lynch, JP Morgan Chase and the Bank of England.

Peter has a wide and very positive renown in the areas of Financial Markets training, product and investment consultancy as well as Expert Witness / Dispute Resolution.