Certified Commercial Banker

TABLE OF CONTENT

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Introduction

• Definition of Banking
• Other Financial Institutions
• Evolution of Commercial Banking System
• Globalization of Banking Systems
• Different Financial Systems

Commercial Banking System

• Nature of Commercial Banks
• Characterstics of Commercial Banks
• Functions of Commercial Banks
• Intermediation
• Payments and Settlement System
• Financial Services
• Trend in Banking

Banking System and Performance Measurement

• Introduction
• Type of Banking Systems
• Factors Affecting Banking Systems
• Universal Banking System
• Commercial Banks vs. Other Financial Institutions
• Performance Measurement

Scheduled Commercial Banks

• Analysis of Assets and Liabilities
• CRR and SLR
• Types of Deposits
• Types of Account Holders
• Guidelines for Opening Accounts
• Loans and Advances
• NPA - Management and Resolutions
• Micro Prudential Norms

Risk and Uncertainties

• Risk and Transformations Services
• Sources of Risk
• Risk Managment
• Regulations of Banking in India

Capital Managment

• Introduction to Bank Capital
• Long Term Debt and Loss Reserves
• Capital Deficiency Correction

Investment Management

• Investments in Government and other Securities
• Classification of Bank Investments
• Investment Goals
• Types of Government Securities
• Investment Policy
• Portfolio Behavior of Commercial Banks
• Investment Classification and Valuation Norms

Liquidity Risk Management

• Introduction
• Measuring Liquidity
• Liquidity Risk
• Liquidity Management
• REPO and Reverse REPOs

Credit Risk Management

• Nature of Credit Risk
• Obstacles to Credit Risk Management
• Deficiencies in Credit Risk Mangement
• Principles in Credit Risk Management
• Methods for Reduction of Credit Risk
• Collateral
• Credit Derivatives
• Bank Lending Services
• Types of leases

Derivatives for Risk Mangement

• Definition and types of Derivatives
• Characteristics of Derivatives
• Types of Traders
• Growth of Derivatives
• Uses of Derivatives
• Risks of Derivatives
• Risk Regulation

Interest Rate Risk

• Net Interest Income
• Factors Affecting Interest Rate Change
• Affects of Interest Rate Change
• Interest Rate Risk Management
• Separation of Interest Rate Risk and Credit Risk

Foreign Currency Dealing

• Currency Convertibility
• Foreign Exchange Market
• Technology and Trading
• Participants in Foreign Exchange Market
• Foreign Exchange Rate and Exchange Quotations
• Currency Arbitrage

Foreign Currency Risk Management

• Foreign Exchange Risk in Commercial Banks
• Hedging and Forward Contracts
• Techniques to Cover Exchange Risk
• Cross Currency Options Trading in India
• Central Bank's Role in Foreign Exchange Risk Management

International Banking

• Introduction
• Financial Intermediation by International Banks
• Euro-dollar Market
• Types of International Banking Offices
• International Banking Activities
• Country Risk
• Loan Syndication and Agreement Provisions
• International Banking Regulation

COURSE OUTLINE

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Trends in Banking

• Demonstrates the global trends in the financial service industry such as consolidation and convergence of banks, development of financial institutions, banks, asset management firms and insurance firms.
• Describes the domestic trends prevalent in the financial system and financial liberalization.
• Explains the dichotomous approach in the banking system consisting of both formal and informal sector.
• Explains the need for a holistic overview to the banking system to appreciate the development in response to the need.
• Explains the three tier structure and the micro prudential norms
• Describe the need to have an autonomous central bank to facilitate the setting of benchmarks, control inflation, asses the changing financial environment and implementing policies.
• Explains the need to assess the quality of asset and illustrates the activities performed by Board of Financial Supervision under of aegis of RBI.
• Explains the process of converting currency i.e., the restriction imposed on foreign exchange transactions or exchange control.
• Describes the need for setting up off-shore banking system preface to convertibility on capital account

Evolution of Commercial Banking System

• Explains different financial systems - Market and Bank Oriented Financial Systems
• Explains the money lending system followed in Ancient India
• Types of Money Lenders and indigenous bankers

Banking Systems

• Brief introduction about the evolution of the banking system in India
• Describes type of banking system and comparison between their operations
• Explains the working and functionalities of Branch Banking
• Illustrates the factors affecting Banking Systems
• Explains the concept of Retail Banking and Wholesale Banking and their practices
• Explains the reason for gap between Regulated and Wholesale deposit rates
• Explains the concept of banking marketisation.
• Elaborates the concept of Universal Banking in Germany, UK and India.

Functions of a Commercial Bank

• Describes the nature and characteristics of Commercial Bank
• Explains the functions of Commercial Bank
• Describes the role of Financial Intermediaries to provide intermediary services such as brokerage and asset transformation.
• Describes the differences between trading activities and commercial banking
• Explains the need of payment and settlement system for improving the conduct of monitory policy in the economy.
• Explains other financial services that a commercial bank provides – securities related services, advice on managing the portfolio or investment counseling.

Scheduled Commercial Bank

• Banking Regulation Act, 1949
• Analyses the assets and Liabilities of commercial banks
• Explains the functions of Bank Capital
• Describes the financial risks involved and need for capital adequacy in the financial system
• Describes the prescribed capital standards to be followed by commercial banks and focus on adjusting the risks faced by the entire banking industry on account of the density of relations amongst banks.
• Classifies the capital of banks, explains the funded risk assets, funded risk assets, off-balance sheet items and norms as prescribed to maintain minimum capital funds.
• Explains the Risk Weighted Approach followed to strengthen the banking system by addition to equity.
• Explains the concept of Inter Bank Borrowing, functions of Call Money Market and explains the collateralized borrowing and lending obligation
• Describes the relation between Money Market and Foreign Exchange Market
• Explains the concept of CRR and SLR on inter-bank deposits
• Explains different types of deposits – Term and Fixed Deposits
• Describes Ownership of Deposits
• Illustrate different type of assets of commercial banks
• Identify Investments in Government and other Securities
• Explains the accounting standards for investment, illustrate Investment Fluctuation reserve, maturity classification of investments in Government Securities
• Explains the process of Retail Banking, growth in housing finance and describes risky loans (also called non-performing assets) as an indicator.
• Describes NPA Resolution and Moral Hazards
• Classification of assets
• Describes Micro Prudential Norms and its elements – income recognition, asset classification, provision for loans & advances and capital adequacy.
• Illustrates on Committee Banking Sector Reform (CBSR) 1998
• Describes valuation of all investment on mark to market basis to facilitate the development of a healthy secondary market
• Explains the concept of Credit Repression

Banking System and Performance Measurement

• Explains the need and importance of strengthening the financial system
• Describes the system and methods used in banks, structural issues being faced and integration of financial markets
• Explains the legal and legislative framework as recommended the amendment to RBI and Banking Regulation act.
• Describes the need for evaluation of bank performance – Internal and external performance.
• Illustrates the planning process of the bank and personnel development
• Explains Income Statement, Financial Ratios, Profit Ratios, Asset Quality Management, Non-Performing Assets, Liquidity Ratios and evaluating operational efficiency.

Capital Management

• Introduction to Bank Capital
• Explain Long Term Debt and Loss Reserves
• Explains the corrective actions to be taken at the time of capital deficiency such as change in asset, change in dividend payout ratio, employee stock ownership, change in profitability and addressing capital issues
• Explains the concept of Recapitalization and merger among banks
• Explains the process of crisis management and recommendation
• Describes restructuring, process of addressing both systematic & Macro level issues and policies for orderly restructuring.

Commercial Banking Risk and uncertainties

• Explains the nature of risk and need for risk management
• Describes Risk Transformation Services such as Risk Management, Source of Risk, Credit Analysis, Bank Marketisation and liability management.
• Explains the concept of rollover loans and flexi rates
• Explains the concept of Banking Internationalization to facilitate Asset-Liability Management.
• Illustrates the overall and types risks of a bank – Credit Risk, Interest Rate Risk, Liquidity Risk, Operational Risk and Foreign Exchange Risk.
• Explains the Treasury Functions and techniques to monitor risks.
• Explains the RBI Guidelines for Risk Management

Derivatives for Risk Management

• Describes the nature, type and characteristics of derivatives
• Explains different categories of risk associated with derivates and risk regulation.

Managing Liquidity Risk

• Explains the concept of liquidity risk and ability to meet anticipated and contingent cash needs
• Elaborates various sources of liquidity and collateralized lending facility
• Explains the process and need for liquidity measurement
• Explains the various theories of Liquidity Management including Commercial Loan Theory, Shiftability Theory, Anticipated Income Theory and liability Management theory

Managing Credit Risk

• Explains nature of credit risk
• Explains the principles in credit risk management – selection, limitation and diversification
• Explains the method of reducing credit risk
• Explains the relation between credit risk and asset liability management
• Explains the importance of credit derivatives as a means of evaluating and transferring credit risk
• Explains the uses of credit derivatives, types of credit derivatives, credit spread options and credit linked notes
• Explains different type of bank lending services for infrastructure projects, advances against shares and debentures, bridge loans, loan against working capital etc
• Explains loans against cash credit and features of loan system
• Explains the procedure of loan syndication, process of syndication and syndication documents
• Illustrates the terms and condition of term loans
• Explains the concept of direct and export Credit
• Explains the process of leasing and describes the type of leases – Sales and lease back, operating lease and Financial/ capital lease
• Explains the concept of housing finance

Managing Interest Rate Risk (IRR)

• Explains the concept of Net Interest Income to determine the profitability of banks
• Explain derivative instrument that allows banks to alter interest rate exposure i.e., Future, Option and Swaps
• Explain the Types of Interest rate swaps and their uses
• Illustrates forward rate agreement and interest rate swaps

Investment Management

• Explains the portfolio behavior of commercial banks by accommodation principle, profit maximizing principle and stock adjustment principle
• Explains REPO and reverse REPOs as a tool to manage the liquidity and maximize bank returns
• Explains different type of Government securities
• Explains the different type of investment risks and security specific risk
• Explains the concept and behavior of yield curve and measures to evaluate yield
• Explains the various measures of bond price volatility

Foreign Currency Dealing

• Describes Foreign Exchange Market and Euro-dollar market
• Explains the purpose and organization of foreign exchange markets
• Describes the impact of technology on trading
• Explains the relationship between exchange and money markets
• Participants in Foreign Exchange Market – Commercial Banks, Traders and Investors, Dealers and Brokers, Investment Banks, Central Banks and Arbitrageurs
• Explains the concept of foreign exchange rates and exchange quotations
• Explains the functioning of Ready Exchange Rate and Exchange Rate Points such as spot exchange rates, forward exchange rates and calculations
• Explains the concept of cross rates and spot contracts
• Explains the concept of currency arbitrage and their type - two point currency arbitrage and triangular arbitrage

Foreign Currency Risk

• Defines exchange risk
• Explains the concept of Hedging and Forward Contracts
• Explains the concept of transactional exposure, translation exposure, economic exposure and their impact
• Describes the technique to cover exchange risk
• Explains the concept of hedging with forward contract – Hedging a long position and short position
• Explains the concept of forward premium and discounts
• Describes the money market alternative and its comparison with forward contract
• Explains concept of Futures – Hedging with Futures, Trading of futures, Types of Traders, Contract Characteristics, Prices and Daily Settlement and determining gains/losses
• Explains the concept of currency swaps, uses and growth of swaps, pricing of swaps, swap transactions
• Defines foreign currency options and its features
• Explains the concept of hedging with options and basic option strategies such as buying a call, buying a put, selling a call and selling a put
• Explains the techniques of pricing currency options and the role of Foreign Exchange Rate Volatility, Spot Rate, Expiration Time and Interest Rate Differential
• Explains the concept of Cross Currency Option Trading in India
• RBI Guidelines for currency option trading in India

International Banking

• Introduction, origin and development of international banking
• Defines the International Banking Regulation
• Explains the activities of International Banks such as bankers acceptance, CP and CD
• Illustrates loan syndication and loan agreement provisions
• Defines guidelines for Euro Loan Syndication projects in India