Early Warning Signals in Banks


Objectives

This two-day intensive workshop will provide a structured approach for identifying early warning signals in financial institutions. The aim is to equip participants with the knowledge and skills to proactively:

  • Understand the causes and symptoms of both systemic and individual bank failure in the global financial crisis
  • Anticipate and quantify the vulnerability of institutions to liquidity and refinancing risk
  • Stress test solvency for write downs from credit, trading, investment and derivative positions
  • Differentiate qualitative, quantitative and market indicators of credit deterioration
  • Identify the likely triggers or events which would change the credit standing of a company in the future.

Analytical Overview

Signs of distress

  • Common themes in troubled financial institutions: excessive growth, over-concentration, volatile earnings sources, asset and liability mismatches, dependence on unstable funding
  • Symptoms of a company’s deteriorating credit standing: financial, non-financial and market indicators.

Structured analytic approach

  • Four step approach to focus on key issues: purpose, payback, risks and structure
  • Purpose of the exposure and sources of payback: importance of refinancing in financial institutions, challenges to downsizing assets and availability of external support
  • Risks to repayment: Identify the key macro, sector and company specific business and financial risks which might jeopardise repayment
  • Structure: conclude on appropriateness of the facilities, assess the level of protection and critique the pricing to assess the risk: return
  • Case study: institution expanding aggressively without a strong deposit base. Lessons learned from the origins of the crisis.

TPLC

1st Floor, Fon Sing Building
12 Edith Cavell Street,
Port Louis,
Mauritius

Tel: +230 213 2626
Fax: +230 214 2047
Email: info@tplc.mu