云安县建筑企业资质证办理云安县建 PPT课件

1、1,Advancing Risk Management by Financial InstitutionsThe Case of Japanese Banks,Tsuyoshi OyamaBank of Japan,Workshop on Risk Management in Banking SectorShanghai, December 21, 2005,广州网站建设 ,2,Agenda,Background of Banks Efforts to Enhance Risk Management and the BOJs Initiatives to Encourage These Eff

2、orts Topics from the Sound Practices Papers and Discussions in the Seminars “Advancing Credit Risk Management through Internal Rating Systems” “Advancing Operational Risk Management” “Advancing Integrated Risk Management”,3,Background of Banks Efforts,The experience of overcoming NPL problems since

3、the 1990s Enhance the risk management of Japanese financial institutions particularly in the area of credit risk management Entail stability of financial system, which led to the lifting of blanket deposit insurance in April, 2005 In this new environment, financial institutions are expected to devel

4、op further creative business services that meet the needs of customers through Assessing various risks not only in a conservative way but also in an accurate way. In other words, financial institutions are expected to grasp effectively the various risks inherent in their business (e.g. economic valu

5、e and its volatility of all the assets they possess and transactions they engage in), and also to establish a framework that manages these risks in an integrated way. In addition, Basel II implementation surely pressures banks to intensify the above efforts.,4,Advancing Risk Management-Means What?,O

6、ur understanding of “advancing risk management” Enhancing the communication tools among stakeholders (senior managers, risk managers, shareholders, regulators, etc.) to reach a consensus view of risk profile and amounts. Not necessarily indicating a more use of Greek letters and math formula What ba

7、nks need is more objective and more persuasive tools to assess risks Objective and persuasive risk assessments lead to higher transparency of risk management process and thereby clarify the responsibility associated with risk taking activities help ensure the direction toward improving risk manageme

8、nt. There are no best practices of banks risk management, which could differ depending on their facing environments need to establish the incentive mechanism to ensure the direction toward improving risk management.,5,The Bank of Japan released the following three papers at the end of July, 2005. Ad

9、vancing Credit Risk Management through Internal Rating Systems Advancing Operational Risk Management Advancing Integrated Risk Management HP： http:/www.boj.or.jp/en/set/05/set_f.htm These papers draw on the issues and measures, on which the Bank of Japan intends to use to start in-depth discussions

10、of risk management with financial institutions at the time of our on-site examinations and off-site monitoring. Main subjects of the three papers roughly correspond to the issues of implementing IRB, AMA and Pillar II under the Basel II,BOJs Initiative (1) - Publication of Sound Practices Papers,6,T

11、he Bank of Japan established the Center for Advanced Financial Technology in July, 2005. One major mission of this new organization is to develop the third channel, besides on-site examinations and off-site monitoring, to communicate with banks about the risk management framework and methods. Using

12、the three sound practice papers as the main subjects, the Center has already hosted: 2 seminars for the large number of financial institutions focusing on overall risk management issues that are dealt with by three papers, and 12 seminars for regional banks (2030 banks for each) focusing on the issu

13、es that are dealt with by one paper for each seminar.,BOJs Initiative (2) - Hosting a Series of Seminars for Banks,7,BOJs Organizational Changes and Setting up the Center for Advanced Financial Technology,Before,After July 8th ,Financial Systems and Bank Examination Dept.,Center for Advanced Financi

14、al Technology(Newly Established),Planning and Implementation,International Issues,On-site Examination,Off-site Monitoring,8,Advancing Risk Management-Its Relation with Basel II,The concept of “advancing risk management” is in line with “successfully implementing Basel II” The concept of Basel II tha

15、t strongly pushes banks toward the direction of assessing risks “more precisely” and “transparently” in a “self-disciplined” manner is completely shared by us when advocating for the need of advancing risk management. Our strategy is to capitalize on, to the maximum, the implementation of Basel II a

16、nd its accompanying momentum of advancing risk management among banks. The greatest challenge for us is how to convince banks of the need and usefulness of advancing risk management “by themselves” in “a flexible manner” and thereby avoid the case where banks seek for an excessively detailed “one-si

17、ze-fits-all” type guidance.,9,“Advancing Credit Risk Management through Internal Rating Systems”,10,SPP-I: “Advancing Credit Risk Management through Internal Rating Systems”,Contents Architecture of internal rating system Rating process and rating models Estimation of risk components Uses of interna

18、l rating systems Validation of internal rating systems Quantification of credit risk The paper tries to show our thinking of sound practices, being compared with current practices of major banks and thereby facilitate small banks to consider them as the real world cases.,11,Framework of Advancing Cr

19、edit Risk Management,Migration matrix Probability of default(PD),Internal use,Risk Components,Loss given default (LGD),Exposure at default (EAD),Correlation,Calculation of credit risk amount,Expected loss (EL) Unexpected loss (UL),Stress testing,Portfolio monitoring,Provisioning,Pricing,Profit manag

20、ement,Capital allocation,Quantification of credit risk,Reporting tothe Board,Internal rating,Quantitative evaluation,Financial data,Qualitative evaluation,(Major discussion points in the seminars) Definition of default, consistent treatment of counterparty risks of market transactions, data integrit

21、y required for estimating risk components, concentration risk control measures using UL outcome, etc .,12,Assessing Ratings,Quantitative rating model,Borrowers financial data,Final Rating,Rating mitigation after 1 year,PD per rating grade,Initial evaluation (tentative),Process of internal Ratings,Es

22、timation of PD,Needs attention,Bankrupt,default,Quantitative evaluation,Qualitative evaluation,Borrowers qualitative information,Normal,1. Model estimating PDs of obligors (Logit or Probit model）2. Model estimating external ratings 3. Hybrid model of 1. and 2.,PD,Score based onfinancial information,

23、13,Quantitative and Qualitative Information Used for Rating Assignment,Examples of Quantitative Factors,Examples of Qualitative Factors,Examples of Factors Determining Facility Ratings,14,What Factors Determine the Ratings?,One dimensional system bases facility ratings on borrower ratings and makes

24、upward or downward adjustments to the grades as necessary to reflect the characteristics of the loan transaction concerned.,A twodimensional system combines borrower ratings with evaluation of the features of individual loan transactions independent of borrowers (e.g., ratings based on LGD).,Borrowe

25、r ratings (1 to 10),Facility ratings (A to J) (One-dimensional system),Borrower ratings,Facility ratings (A to J) (Twodimensional system) Ratings based on LGD,Borrower ratings,(Major discussion points in the seminars) The need and usefulness of facility rating given the widespread use of unique pled

26、ge system in lending, i.e. “pooled collateral system” where each collateral is not linked to each transactions but to each borrower.,15,How to Validate Rating Model?,0,100,CAP curve of a perfect model,CAP curve of random model(no discriminatory power),CAP curve of a model being evaluated,(%),A,B,A m

27、odel has more accuracy as the curve moves to the upper left,Ratio of cumulative number ofdefaulted firms,100,(%),Score,Non-defaulted firms,Defaulted firms,Numberof firms,Rating at the end of the year,Rating at the beginning of the year,Check the order of migration rate from rating 1 to other ratings

28、,Check the order of default rates,Check the order of migration rate to rating 7 from other ratings,Default,(Example 1),(Example 2),Many banks including major ones are still seeking for the appropriate validation methods of internal rating systems and risk components.,16,Use of Internal Rating System

29、s,Use of Internal rating systems (Loan Origination) Setting upper credit limits based on rating grades Setting authority ranks for loan approval by rating grade Simplifying the loan review process for highergraded borrowers (Monitoring) Monitoring individual borrowers based on rating grades Monitori

30、ng the overall loan portfolio Uses of PD for each rating grade Quantification of credit risk and allocation of capital Pricing of loan rates reflecting credit risk Evaluating the economic value of loans,Many banks have already used the internal rating systems as indicated in the above with some exce

31、ptions such as facility rating.,17,II.Advancing Operational Risk,18,SPP-II: “Advancing Operational Risk Management ”,Contents Characteristics of op risk and the need to advance op risk management Overview of efforts to advance op risk management and the establishment of an op risk management section

32、 Quantifying op risk Approaches to identifying and assessing op risk other than quantification The paper tries to strike the right balance between the importance of advancing op risk management using e.g. risk quantification methods and the need to maintain the conventional op risk management by emp

33、hasizing their complementary characteristics.,19,Advancing Op. Risk - Why Now?,Changes in the environment surrounding FIs operations Business diversification, more sophisticated financial technologies, widely used IT and outsourcing. The introduction of Basel II（allocation of capital for op. risk) M

34、ajor disaster such as earthquakes, terrorist attacks and uncovering of serious corporate scandals (society is increasingly aware of the need for the firms management of op. risk).,New challenges Need to manage op. risk more efficiently by identifying op. risk profile in a firm-wide manner and thereb

35、y putting some priority on their management. Need to establish structures that can quickly detect heightened risk and respond appropriately before the risk materializes. Need to create mechanisms for autonomous risk management in all sections of their operations.,20,Characteristic of Op. Risk,Forms

36、of risk materialization Direct loss, indirect loss or impact incurred to third parties High frequency and low severityorlow frequency and high severity,Causes of risk materialization It is normally difficult to narrow down the factors causing such risk to materialize, and quite often, it only emerge

37、s when several factors come into play simultaneously.,Smallscale problems occurring at relatively high frequency,Problems that do not occur often but have severe consequences when they do occur,Distribution of Losses Arising from the Materialization of Op. Risk,Frequency,Amount of loss of losses,Fre

38、quency,21,Conventional Operational Risk Management Methods,22,Considerations of Op. Risk Management,The need to cover a wide range of events and activities It is difficult to break down risk into the categories of exposure and risk factors. The need for risk control in all sections within the instit

39、ution Op. risk exists in all sections throughout the institution. The importance of risk management based on qualitative information It is not always easy to manage them in a quantitative manner. Reputational and systemic risk It is necessary to take into consideration of the indirect loss and the e

40、ffect on financial system.,(Major discussion points in the seminars) The need and merits of advancing op. risk management with risk quantification for regional banks, degree of independence of op risk control function, how to quantify op risk when facing lack of internal data and no external data, l

41、evel of granularity of operational processes to be examined by CSA.,23,Establishment of an Operational Management Section,Functions of Operational Management Section Plan the op. risk management framework for the entire institution. Collect and analyze information on accidents and other problems, co

42、mputer system malfunctions, and clerical errors arising in each section, then report to the management. Examine the adequacy and consistency of processes and procedures (P&P). Evaluate and guide the operational risk management situation. Structure of Operational Management Section,Integrated Risk Ma

43、nagement Section,（system risk）,IT System Planning Section System Risk Management Section,Operational Management Section,Compliance Management Section,（operational ）,（compliance）,Computer Center,Head Office, Branch Office,number: function weak relationship,Operations Planning Section,24,Quantificatio

44、n of Op. Risk,Considerations Appropriate collection, classification and update of loss data. Selection of model which is able to identify cases of losses with low frequency but high severity. Setting group units for quantification. Introducing hypothetical data based on external data or scenario ana

45、lyses into quantitative models. Using qualitative data to revise the quantification results.,Loss amount per loss event,Number of loss events occurring per year,Frequency,Frequency distribution of loss events (per year)-e.g. Poisson distribution,Op. risk amount (99.0%VaR),Op. risk amount (99.9%VaR),

46、Annual cumulative loss amount,Cumulative loss amount distribution for one year,Frequency,Frequency,Distribution of loss amount per loss event-e.g. lognormal distribution,25,Control of Self-Assessments and Key Risk Indicators,Control of Self-Assessments Individual sections or business lines within a

47、financial institution evaluate inherent risk and internal control conditions on their own Results are coordinated and shared within the entire organization,Selecting multiple indicators that contribute to early detection of heightened risk Monitoring of their movements, and reacting preemptively as

48、necessary Example of indicator Operations：Business volumes, customers waiting time, number of clerical errors, number of complaints received, etc. Computer systems：Number of malfunctions, number of steps in developing programs, utilization ratio of system devices such as CPUs, storages, network traf

49、fics, etc.,Key Risk Indicators,26,III.Advancing Integrated Risk Management,27,SPP-III: “Advancing Integrated Risk Management”,Contents Overview of integrated risk management at financial institutions Integrated risk management for use: Issues to be addressed with high priority Other issues to be dis

50、cussed for further enhancing the effectiveness of integrated risk management Use of integrated risk management in corporate management Some risks are very important for Japanese banks to address, but the methods for identifying them have not yet been established, and thus they are managed differentl

51、y from one banks to another. The paper emphasizes the importance of incorporating these risks into banks integrated risk management framework as well as other traditionally well identified risks. Some good examples of the unique risks to Japanese banks are risk associated with preferred stock, risk

52、associated with deferred tax assets and risk associated with loans to borrowers with strong relationship.,28,Framework of Integrated Risk Management,Risk is quantified using the statistical method based on the past data such as VaR. Allocating hypothetical capital for internal control purposes to ea

53、ch section within the scope of total capital. Each section then manages the risk so that it does not exceed the allocated capital. The profitability of each section is assessed in terms of return against risk.,-,-,Risk capital,Quantified risk,Allocation of risk capital,Risk capital commensurate with

54、 credit risk,Regulatory capital,Credit risk,Market risk,Op. risk,Profits made by department each section,Securing adequate capital relative to risk,Assessing profitability of each department section in terms of return against risk,Risk taking within the scope of risk capital,Risk capital commensurat

55、e with op. risk,Risk capital commensurate with market risk,29,Organizational Frameworks,Risk management section and treasury section have co-jurisdiction over integrated risk management. It is desirable that risk management section is independent from the front line. If difficult, it is essential to

56、 ensure that such risk management functions in the front line are subject to proper checks and balances through regular assessments by third-party, that is, internal audits.,Example of an Integrated Risk Management System Using CrossOrganizational Forums,30,Identifying Risk,When identifying risk and

57、 risk amounts, it is important to consider the scope of risks to be covered, holding period, confidence interval, correlation between risks, and stress testing.,Targeting risk: credit risk, market risk, interest risk associated with bonds, op. risk, etc.,：,Correlation between risks,Needs of verifyin

58、g the stability of the correlation,frequency,amount of loss,Stress testing,Complementing the limit of VaR,Focus of objectivity vs focus of flexibility,Non-targeting risk,Needs of considering how to deal with these risks in the integrated risk management framework,Confidence intervals (e.g. 99%, 99.9%, 99.97%),Directly linked to management judgment,Holding period: consistency with investment policies of assets,（e.g. credit risk and i