Competency Based Interview & Selection Techniques Certification Course

1.1 Evolution of the Basel Standards

•  Basel I → Basel II → Basel 2.5 → Basel III → Basel III Final (2017 Reforms) 
•  Why "Basel IV" is an industry term rather than an official BCBS standard 
•  Post-financial crisis reforms and global implementation variations 

1.2 The Three Pillars Framework (Applicable Under Basel III Final)

• Pillar 1: Minimum Capital Requirements 
• Pillar 2: Supervisory Review Process 
• Pillar 3: Market Discipline 

2.1 Composition of Regulatory Capital

•  Common Equity Tier 1 (CET1) 
•  Additional Tier 1 (AT1) 
•  Tier 2 Capital 
•  Regulatory deductions and capital adjustments 

2.2 Basel III Capital Ratios

•  CET1 Capital Ratio 
•  Tier 1 Capital Ratio 
•  Total Capital Ratio 

2.3 Capital Buffers

•  Capital Conservation Buffer (CCB) 
•  Countercyclical Capital Buffer (CCyB) 
•  Global Systemically Important Banks (G-SIB) and Domestic Systemically Important Banks (D-SIB) Capital Surcharges 

2.4 Macroprudential Reforms

•  Systemic Risk Buffers (jurisdiction-specific) 
•  Interaction between stress testing, Pillar 2 Requirements (P2R), and Pillar 2 Guidance (P2G) 

3.1 Liquidity Risk Concepts and Lessons from the 2008 Financial Crisis

•  Bank runs and liquidity spirals 
•  Role of short-term wholesale funding 
•  Interaction between leverage and liquidity risk 

3.2 Regulatory Response

•  Introduction of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) 
•  Intraday liquidity monitoring 
•  National implementation differences across the EU, U.S., UK, and South Africa (SARB) 

4.1 Understanding the LCR

•  A 30-day liquidity stress metric 

4.2 High-Quality Liquid Assets (HQLA)

•  Level 1 Assets 
•  Level 2A Assets 
•  Level 2B Assets 
•  Haircuts and operational eligibility requirements 

4.3 LCR Calculation Methodology

•  Cash outflows and cash inflows 
• LCR = HQLA ÷ Net Cash Outflows

4.4 Global Implementation Status (2026)

•  Global consistency with regional implementation differences 

5.1 Purpose and Objectives

•  Long-term structural funding requirement 

5.2 Calculation Components

•  Available Stable Funding (ASF) 
•  Required Stable Funding (RSF) 

5.3 Global Implementation Status

6.1 Role Within the Basel Framework

•  A backstop to risk-weighted capital requirements 
•  Preventing excessive leverage 

6.2 Exposure Measure Components

•  On-balance sheet exposures 
•  Off-balance sheet exposures 
•  Derivatives and Securities Financing Transactions (SFTs) 

6.3 Global Implementation

•  G-SIB Supplementary Leverage Ratio (SLR) 
•  Regional implementation differences across the EU, UK, and South Africa (SARB) 

7.1 Key Changes Introduced by the 2017 Final Reforms

•  Revised Standardised Approach for Credit Risk 
•  Restrictions on Internal Ratings-Based (IRB) models 
•  Output Floor (72.5% of Standardised Approach RWA) 
•  Standardised Measurement Approach (SMA) for Operational Risk 
•  Fundamental Review of the Trading Book (FRTB) for Market Risk 
•  Revised Leverage Ratio framework 

7.2 Implementation Timeline (2026 Status)

• EU: CRR III effective from January 2025 
• U.S.: Basel III Endgame phased implementation (2025–2028) 
• UK: Basel 3.1 implementation from 2026 onwards 
• South Africa (SARB): Phased adoption aligned with BCBS standards 

8.1 Revised Standardised Approach (SA)

•  Restructured exposure classes 
•  Revised risk-weighting methodologies for: 
•  Corporates (rated and unrated) 
•  Banks (new category-based approach) 
•  Commercial real estate (income-producing and non-income-producing) 
•  Retail, SME, and specialised lending exposures 
•  Enhanced due diligence requirements 
•  Updates to Credit Risk Mitigation (CRM) 
•  Revised collateral eligibility and haircut requirements 
• Practical Exercises (Optional)
•  Standardised RWA calculations 
•  Collateral and guarantee recognition 
•  Corporate borrower case study 

8.2 Internal Ratings-Based (IRB) Approach

•  Removal of Advanced IRB for corporate, bank, and financial institution exposures 
•  Minimum parameter floors for PD, LGD, and EAD 
•  Revised downturn LGD methodology 
•  Measures to reduce RWA variability 

8.2.1 Foundation IRB (F-IRB)

1.  Components: 
2.  Probability of Default (PD) – Bank estimated 
3.  Loss Given Default (LGD) – Regulatory prescribed 
4.  Maturity (M) 
5.  Exposure at Default (EAD) 
6.  Eligible asset classes under F-IRB (2026) 
7.  Credit Risk Mitigation under IRB 

8.2.2 Advanced IRB (A-IRB)

1.  Continued availability for limited portfolios in selected jurisdictions 
2. Practical Exercises
3.  IRB PD/LGD calculations 
4.  Standardised vs. IRB RWA comparison 
5.  Impact assessment of revised parameter floors 

9.1 Introduction to Operational Risk
9.2 SMA Components

•  Business Indicator (BI) 
•  Business Indicator Component (BIC) 
•  Internal Loss Multiplier (ILM) 
•  Loss Component 

9.3 Regulatory Capital Calculation

•  SMA calculation methodology 
•  Internal loss data requirements 
•  Impact on banks transitioning from the Advanced Measurement Approach (AMA) 
• Practical Exercises
•  SMA capital calculation using sample data 

10.1 Purpose

•  Limiting excessive reductions in RWA under internal models 

10.2 Calculation

• Total RWA ≥ 72.5% of Standardised Approach RWA
• 10.3 Transition Arrangements (2026 Status)
•  EU multi-year phase-in 
•  Jurisdiction-specific implementation in the U.S. and UK 

11.1 Trading Book vs. Banking Book Boundary
11.2 Standardised Approach (SA)

•  Sensitivities-Based Method (Delta, Vega, Curvature) 
•  Default Risk Charge (DRC) 
•  Residual Risk Add-On (RRAO) 

11.3 Internal Models Approach (IMA)

•  Expected Shortfall (ES) 
•  Non-Modellable Risk Factors (NMRFs) 
•  Profit and Loss Attribution (PLA) Tests 

11.4 Regional Implementation

• EU: Reporting requirements prior to full capital implementation 
• U.S. and UK: Phased implementation 
• Emerging Markets: Varying implementation timelines 
• Practical Exercises
•  Sensitivities-Based Method (SBM) calculations 
•  Default Risk Charge (DRC) examples 

12.1 CIU Treatment Under CRR (Outside FRTB)

•  Look-through approach 
•  Mandate-based approach 
•  Fall-back approach 
•  Articles 323a–323c of CRR III 

Note

•  Legacy equity risk rules remain applicable in certain EU regulatory reporting templates. 

•  RWA treatment under the revised Standardised and IRB Approaches 
•  Updated Credit Conversion Factors (CCFs) for off-balance sheet exposures 
•  Credit Risk Mitigation (CRM) treatment for trade finance products 
•  Supply chain finance considerations 

15.1 South Africa (SARB)

•  Local implementation of Basel III reforms 
•  Domestic systemic risk buffers 
•  Liquidity requirements 
•  Internal model approval process 

15.2 United States – Basel III Endgame

•  Standardised and Expanded Risk-Based Approaches 
•  Revised Credit Risk, Market Risk, and Operational Risk frameworks 
•  Phased implementation (2025–2028) 

15.3 European Union – CRR III / CRD VI

•  Effective from January 2025 
•  Output Floor transition arrangements 
•  Restrictions on IRB approaches 

15.4 United Kingdom – Basel 3.1

•  Implementation from 2026 onwards 
•  UK-specific regulatory calibrations 

15.5 Other Emerging Market Jurisdictions

•  Phased implementation strategies 
•  National discretions and jurisdiction-specific adaptations