72873463 caiib super notes bank financial management module d balance sheet management raroc and...
TRANSCRIPT
-
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
1/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
RAROC and Profit Planning
Module D: Balance Sheet Management
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
2/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
CAIIB
SUPER NOTES
Bank Financial Management: RAROC and Profit Planning
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
3/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Contents
Coverage:
1. Profit Planning
2. Risk Aggregation and
Capital Allocation
3. Economic Capital and
RAROC
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
4/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
PROFIT PLANNING
1.
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
5/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Profit Planning
Essentially involves Balance Sheet Management covering credit,
investment and non-fund based income
Income arises from three sources (Need to be maximized):
Interest Income
Fee Based Income
Treasury Income
Expenses(Need to be minimized):
Interest Expenses
Operating Expenses (Staff Costs and other costs)
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
6/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
RISK AGGREGATION AND CAPITALALLOCATION
2.
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
7/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Risk Aggregation and Capital Allocation
Most commonly used approach to estimate aggregate risk exposure is
RAROC (Risk Adjusted Return On Capital)
Key is matching of revenues, costs and risks on transaction or portfolio basis over a
defined period
Expected losses are covered by reserves and unexpected losses require capital
allocation
Second approach is EaR
Similar to RAROC but depends less on capital allocation and more on cash flows or
variability in earnings
Ignores the value changes in Assets and Liabilities due to changes in market
interest rates
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
8/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
ECONOMIC CAPITAL AND RAROC
3.
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
9/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Economic Capital and RAROC
Risk Capital: Economic capital required to support the banks
financial risk
Pricing of products should be a buffer against expected losses
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
10/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Risk Capital
RAROC is part of family of risk adjusted performance
measures (RAPM)
Risk Capital (RC) = VAR
RAPM = Profit/RC
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
11/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
RAROC Methodology
Risk Management: Includes measurement of portfolio
exposure, the volatility and correlations of risk factors
Capital Allocation: Requires choice of a confidence level andhorizon for the VAR measure
Performance Measurement: Adjustment of performance to
Risk Capial
Can be based on RAPM Method
EVA = Profit (Capital x k) (Higher the EVA, better the project/product)
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
12/13
CAIIB Super-Notes M S Ahluwalia Sirf Business
Do you have any questions or queries or some feedback to give?
Just mark an email to [email protected]
http://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://sirfbusiness.blogspot.com/search/label/CAIIBhttp://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/mailto:[email protected]:[email protected]://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB -
7/28/2019 72873463 CAIIB Super Notes Bank Financial Management Module D Balance Sheet Management RAROC and Profit Planning
13/13
CAIIB Super-Notes M S Ahluwalia Sirf BusinessFor more Super-Notes: Click Here
M S Ahluwalia, amongst other things, is a visual artist, blogger,
blog designer and of course an MBA and Banker from New
Delhi, India.
To know more about him you may visit his blog-site:Estudiante De La Vida
http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://www.facebook.com/pages/M-S-Ahluwalia/258015240783http://twitter.com/msahluwaliahttp://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://sirfbusiness.blogspot.com/http://msahluwalia.blogspot.com/http://sirfbusiness.blogspot.com/search/label/CAIIB