Bank Modelling & Analysis

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 1: 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: 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.

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