Assignment Outline:
The assignment is a report requested by the senior management at ABC Bank. As ABC Bank’s risk trainee, prepare a report on the bank’s ability to meet the requirements of the Basel III Framework, which will be submitted to the bank’s senior risk analyst.
You should also, where appropriate, use numerical techniques to quantify the risks and costs.
Required:
The cover page should contain a title, the total word count and an Executive Summary describing your key findings. (5 marks)
You are given the latest trading book of ABC Bank (in the Excel Data file for the Referral/Deferral Final Report). In the list of items, two stocks were added to the portfolio just now and they are currently the least liquid items in the trading book of the Bank. Quantify the implication of the purchase on reserve requirements and the trading costs incurred. Comment on the implication of the new purchase under current liquidity risk requirement.
Provide a critical discussion on interest sensitive gap management when used as interest risk management tool in banks. Comment on its effectiveness and implication on leverage requirement.
ABC Bank’s regulators require that the bank use multiple risk mitigating approaches for the upcoming stress testing. Critically discuss the credit risk management approaches used by banks. Comment on the strengths and weaknesses of each approach.
Provide a critical discussion of relevant academic articles on the effectiveness of the Basel III framework, in particular, the use of countercyclical buffer. Cover at least 3 academic articles on the topic (at least 1 of which should be from within the last three years).
List of references is required. You should provide the details of any the material that was cited in the report.
