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Capital Adequacy for Beginners


This programme aims to provide participants with a high level understanding of what capital adequacy is and understanding it is so important for reputation, financial performance, customer relations and regulatory reasons. It is a one day workshop structured around four interactive sessions as shown below.

Learning Outcome

At the end of the session, participants will have calculated a capital adequacy ratio for a bank using balance sheet data and will be able to give a definition and explanation of the capital adequacy ratio. They will also obtain a clearer insight into how regulatory capital affects the business and strategy of a bank and how it affects the conduct of its management, its share-holders, its board of directors, its customers, its fellow financial institutions and of course its regulators and even governments.

Target Participants

The seminar and workshop is aimed at staff from business areas which are affected by capital management considerations. These areas would include risk management, financial control, new business acquisition and treasury. This seminar aims to help non- regulatory staff to understand better the regulatory framework for capital adequacy without being buried in jargon and complex mathematics. This seminar and workshop is also suitable for new entrants to banks in the regulatory reporting and compliance areas.

Course Outline

  • Regulatory capital: components, caps, deductions and how it differs from the accounting concept of shareholders’ equity
  • Risk-weighted assets: How they differ from ‘assets’ in financial statements. What is risk- weighting and why is it necessary?

The Capital Adequacy Ratio:

  • What is in the denominator and the numerator?
  • What causes capital adequacy ratios to change?
  • What happens if a capital adequacy ratio goes below the required minimum
  • How assets ‘consume’ regulatory capital and therefore why it is important to price differing assets according to their consumption of regulatory capital.
  • How capital adequacy ratios influence ‘deleveraging’ and a quick comparison of the capital adequacy ratio with the leverage ratio. The changing landscape of capital adequacy ratios; a comparison of Basel I, Basel II and Basel III. Calculating a capital adequacy ratio: a workshop session.

Trainer’s Profile

Richard Ellis has worked for a total of five central banks, specializing in policy formulation and supervision. His recent work has involved developing and implementing the corporate governance code and framework for financial institutions in Bahrain, with particular reference to the compliance and control functions. He has also worked on anti- money laundering and associated legislation and rules over the past 16 years in The Bahamas and Bahrain prior to coming to Brunei in 2015. His other work includes implementing Basel II and Basel III. He has also worked for a major audit firm and a global bank group and therefore his outlook on compliance from the three perspectives of bank, regulator, and audit firm promise to make this introduction to compliance and the compliance culture highly useful and thought-provoking for participants.

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