BA6 - Auditing Basel II

Course Objectives

At the heart of the Basel II requirements for international credit-risk management is the need to have sound data behind customer identification and risk assessment.  Information technology represents the greatest area of risk on an operational level for the successful implementation of Basel II compliance.  Data quality and audit-ability is the cornerstone of an end-to-end global compliance solution.

The four principal objectives behind Basel II are:

  1. To promote soundness and stability of the global banking and financial system
  2. To enhance competitive equality
  3. To provide a more competitive approach to addressing risks and promote best practices in risk management
    (the original Accord failed to address credit risk and operational risk)
  4. To provide a more widely applicable approach to the capital assessment process.

Basel II applies internationally to active banks in the G10 countries, including Canada and the United States as well as their subsidiaries in non-G10 countries. The EU has decided to adopt Basel II for all credit institutions and investment businesses operating in their jurisdiction.

Basel II challenges existing thinking as to where and how financial information and data is provided and controlled. The Basel II Accord introduces new levels of complexity with specific data and reporting requirements. Most financial organizations use transaction-oriented processes. Thus, some of the technology and process challenges that must be addressed to ensure Basel II compliance are:

  • Re-educate the organization
  • Technology infrastructure upgrades
  • Data quality
  • Audit trail management
  • Data management
  • Reporting
  • Risk Management

 By the end if the course, delegates will:

  •          Understand the nature and causes of banking risks

  •          Have a clear understanding of the risk management process

  •          Understand asset-liability management models

  •          Understand both credit risk models and market risk

  •          Understand the complexities of portfolio and capital management

Day 1 – banking risks

The Accords

  •          Understanding Basel I and Basel II accords

  •          The “Three Pillars” of Basel

  •          Potential problems

Banking Risk management

  •          Understanding the risk management process

  •          Risk versus capital

  •          Credit-risk

  •          Operational risk

  •          Other risk areas

Risk mitigation strategies

  •          Credit-risk

  •          Securitization

Risk assessment processes

  •          The audit process

Day 2: The Audit Process

The internal audit role

  •     Internal audit in practice
  •     Internal audit’s role in corporate governance
  •     Relations with the external auditor and the regulator of banks
  •     Internal audits relationship with the compliance officer

Audit Program Development and Techniques

  •          Developing the compliance audit programme

  •          Developing the individual audit

Operating risk auditing

  •          Operating Risk Identification and Assessment:

  •          Operating Risk Measurement and Quantification

  •          Operating Risk Analysis, Monitoring & Reporting

  •          Operating Risk Capital Allocation

  •          Operating risk auditing

Market risk

  •          Understanding market risks

  •          Models for market risks

  •          Portfolio market risk

  •          Market risk auditing

Credit risk models

  •          Risk drivers

  •          Risk exposures

  •          Standalone risk

  •          Risk correlations

  •          Portfolio risk

  •          Capital risk

  •          Capital risk auditing

Who Should Attend

Bankers, Accountants, Auditors and consultants who are required to implement, or audit the implementation of, the Basel II Accords in the course of their duties. 


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