Category: Internal Capital Adequacy Assessment Process: Pillar II of Basel Committee

Internal Capital Adequacy Assessment Process: Pillar II of Basel Committee

Internal Capital Adequacy Assessment Process: Pillar II of Basel Committee

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Pillar I of Basel Committee covers measurement and providing capital for three elements of banking risk viz. counterparty credit risk, interest rate risk in trading book and operational risk. Banks also need to look at other elements of risk such as credit concentration risk, interest rate risk in banking book, liquidity risk, etc. Recent global crisis has highlighted the importance of some of these risks. There are some more elements of banking risk where the assessment is more of a qualitative nature. They include reputation risk, strategic risk, compliance risk, etc. Pillar II of Basel Committee covers the banking risks mentioned above. The said Pillar II has two components: a) Internal Capital Adequacy Assessment Process (ICAAP) and b) Supervisory Review & Evaluation Process (SREP). SAMA has already implemented the ICAAP for Saudi banks effective from 2009. These ICAAP documents are required to be submitted to SAMA on a regular basis. They form an important part of the review process undertaken by the Central Bank. In this context, the proposed training program will be extremely useful.

Course objective

At the end of the course delegates will be able to:

  • Get familiarized with Internal Capital Adequacy Assessment Process (ICAAP) used to identify, measure, control and provide adequate capital for material risks not covered under Pillar I of Basel Committee
  • Prepare comprehensive ICAAP document for Board approval and submission to the Central Bank
  • Facilitate ‘Supervisory Review and Evaluation Process’

Course outline

  • Overview of Basel II framework
  • Pillar II – Internal Capital Adequacy Assessment Process and Supervisory Review- major steps and issues
  • Measuring material risks
  • Qualitative risk assessment
  • Stress testing techniques and scenario analysis
  • ICAAP – management perspective
  • Corporate Governance issues
  • Risk appetite statement
  • Business growth and capital planning

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