Training Catalog Course Details

Upon completion of this course, participants should be able to: 

• Identify the main determinants for collateral eligibility (safety, liquidity, volume, observable prices, operational risks and costs, sufficient availability in the banking system, legal certainty, correlation risk). 
• Explain the pros and cons of narrow vs. broad monetary policy collateral frameworks. 
• Understand valuation approaches for marketable and non-marketable assets in the contexts of liquid and illiquid markets. 
• Explain risk equivalence as guiding principle for risk control measures and understand how the absence of risk equivalence can be reflected by adverse selection of collateral. 
• Understand the principles for the use and calibration of various risk control measures (haircuts, haircut add-ons, concentration limits, overcollateralization, margin calls). 
• Understand the general quantitative framework for setting haircuts for central bank’s risk management, as well as tail-risk-based models for marketable securities and non-marketable claims used as collateral, and illustrative examples and practical issues in implementing haircut models. 
• Explain the pros and cons of expanding collateral eligibility to foreign-denominated assets. 
• Identify the building blocks for the acceptance of credit claims as collateral (legal framework, credit quality determination, eligibility criteria and risk mitigation measures, procedural aspects). 
• Discuss the pros and cons of expanding the monetary policy collateral framework in crisis times. 
• Establish counterparty eligibility criteria for monetary policy operations, and a procedure to suspend counterparties not complying with those criteria (grace period mechanism). 
• Explain the key conditions for Emergency Liquidity Assistance (ELA) (temporary nature of the liquidity stress, support as last resort, solvency, viability, collateral, conditionality, monitoring through funding plans), as well as the key ELA parameters (maturity, time limit, interest rate). 
• Understand the differences between monetary policy and ELA collateral frameworks. 
• Explain the key principles for funding plans and for their use in ELA cases, and how an effective conditionality framework can help alleviate ELA collateral pressures. 
• Discuss the pros and cons of, and the requirement for, expanding ELA eligibility to non-bank financial institutions. 
• Identify the building blocks for the ELA legal architecture (central bank law, ELA regulation, ELA procedures, Memoranda of Understanding (MOUs) with the Ministry of Finance and the banking supervisor). 
• Discuss the pros and cons of the provision of ELA in foreign currency. 
• Design ELA simulations to support ELA preparedness and operationalization.