A. UNDERSTANDING CREDIT / COUNTERPARTY RISK

• What is Credit/Counterparty Risk (Billateral Risk)?
• Background and Purpose of Counterparty Credit Limit
• What are the differences between Loan Exposure and Ctpty Exposures?
• How to Mitigate Counterparty Credit Risk?
• Diversification
• Netting
• Payment Netting
• Close-Out Netting
• Collateralization : Collateral Value VS Market Value
• Hedging by Credit Derivatives : Credit Default Swap (CDS), TRORS, etc

B. TREASURY EXPOSURES IN FINANCIAL MARKET, RISK IDENTIFICATION, RISK MEASUREMENT–EXAMPLES & EXPOSURES CALCULATION

• Money Market Transaction (Interbank Placement, Buy MM : NCD, PN)
• Capital Market Transaction (Buy Bond : Outright, Repo/Reverse)
• Foreign Exchange Transaction : Tod, Tom, Spot, FX Forward, FX Swap
• Pre Settlement Risk - Buy Bond Outright Transaction (Gov’t, Corporate)
• Issuer Risk - Buy Corporate Bond
• Settlemet Risk - Buy Bond without DVP Settlement Mode
• Repo/Reverse Bond with Counterparty (Collateral Coverage, Hair Cut)
• Derivatives Transaction : Interest Rate Swap, Cross Currency Swap

C. TREASURY FACILITIES / LIMIT TO MITIGATE CREDIT RISK

• Interbank Placement (Money Market) Limit
• Placement to other Banks (Interbank Call Money Placement)
• Buy Outright MM Instuments : SBI, SPN, NCD, CP, PN, etc
• Bonds Issuer /Obligor Limit
• Buy Outright Non Government Bond / Corporate Bond
• Bonds Pre-Settlement Limit & Bond Settlement Limit
• Buy Bond with Settlement Date H + ….
• Repo & Reverse Bonds Limit
• Repo Bond Govt/Corporate and Reverse Repo Bond to Counterparty
• Forex Pre Settlement Limit and Forex Settlement Limit
• Pre Settlement Limit & Settlement Limit for Derivatives (Interest Rate Swap – IRS & Cross Currency Swap – CCS / CCIRS)

D. HOW TO ANALYZE THE BANK COUNTERPARTY?

• Types of Bank Counterparty
• Foreign Banks
• State Owned Banks
• National Private Banks
• Joint Venture Banks
• CREDIT ANALYSIS - Qualitative and Quantitative Analysis Conducted
• Quantitative Analysis
• Qualitative Analysis
• The Use of External and Internal Rating
• Rating Agencies
• Credit Rating

E. HOW TO SET UP THE CREDIT LIMIT?

• Observing the Right Facilities for a Counterparty
• Past Transaction Utilization Record
• Reciprocity Issues

F. WHAT ARE THE REQUIREMENTS TO PROPOSE LIMIT/LINES

• Types of Limit Needed
• Maximum Tenor
• Counterparty Type
• Underlying
• Available LLL

G. CREDIT LIMIT CALCULATION

• Legal Lending Limit
• Placement That Exempted From LLL Calculation
• Counterparty Credit Limit Calculation based on 3L & Examples
• Exercises – Set Up Credit Limit based on parameters (Total Ctpty Limit)
• How to Calculate Total Exposures
• Other Considerations

H. LIMIT APPROVAL PROCESS

• What Must be Available in a Credit Proposal
• Maximum Limit Calculation (Rating, Equity (LLL), Internal Parameter)
• Credit Proposal Flow
• Who Should Involved in Credit Risk Management ? : Treasury Div, FIinancial In-stitution DIv, Credit Reviewer Div, Credit Risk Div, Credit Opr Div, Treasury Oper-ation Div - Sharing & Discussion
• Credit Authorization Limit

I. LIMIT MONITORING, REPORTING AND CONTROLLING/BREACHING

• Limit Monitoring Procedure
• Limit Reporting – Utilization Existing Limit & Collateral Adequacy
• Limit Controlling / Breach – Flow of Work
• Type of Excess
• Tecjnical Excess
• Passive Excess
• Active Excess
• Limit Freeze

J. SIMULATION / CASES / EXERCISES

• Exercises to determine Counterparty Credit Limit
• Cases in Monitoring Counterparty Credit Limit
• Cases in Controlling/Escalation Counterparty Credit Limit

K. CONCLUSION AND SUMMARY