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Financial Sector Policies

Cancelled - Systemic Macro Financial Risk Analysis (MFRA)


Session No.: JV 20.15

Location: Vienna, Austria

Date: April 13-22, 2020 (2 weeks)

Primary Language: English

    Target Audience

    Officials from financial stability/macroprudential analysis departments in central banks, supervisory agencies, and ministries of finance.

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    Participants should have a degree in economics or finance. Experience in financial stability/macroprudential analysis is highly desirable.

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    Course Description

    This course, presented by the Monetary and Capital Markets Department consists of four modules, addressing timely topics in the area of financial stability and macroprudential analysis. The modules will involve various hands-on training components. 

    • The first module focuses on credit risk modeling, with an emphasis on the new accounting standard for financial instruments, IFRS 9. The module covers the IFRS 9 elements that matter most from a macro stress testing and macro risk analysis perspective. The module will help participants understand the principle-based approach of IFRS 9 from a credit risk perspective; the principles of staging, stage migration and related criteria; and the forward-looking impairment model. The module will include several hands-on training components.
    • The second module will concern macro-financial scenario design principles and methodologies, with an emphasis on concepts of feedback, second-round effects, and dynamic balance sheet stress testing, which all have gained traction and prominence in recent years. The module will clarify the precise meaning of these concepts and show their practical implementation in an integrated model framework.
    • The third module covers operational risk analysis, with a focus on cyber risk as one of its sub-components, from both an individual financial institution and a system perspective. Participants will learn about empirical characteristics of operational loss data, sources of external loss databases, and common risk quantification methods for regulatory capital estimation and stress testing. Methods that will be covered include, for example, event frequency modeling, fat-tailed loss severity modeling and loss dependence modeling with hands-on, data-based illustrations.
    • The fourth module is centered on nonbank financial institutions (NBFIs), including elements of FinTech. Participants will learn about the defining criteria of different forms of NBFIs, how their role and significance in the financial system across countries has evolved in particular since the Global Financial Crisis, and what risks they imply for financial stability, for example with regard to liquidity and redemption risk, fire sale affects, interconnectedness with banks and other NBFIs, and their contribution to the build-up of leverage, among others. Case studies of emerging risks in the NBFI sphere will conclude the module.


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    Course Objectives

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

    • Understand and apply the basic principles of IFRS 9 in macro stress testing and macro-financial risk analysis.
    • Understand good practices in scenario design, including the concepts of macro-financial feedback and second-round effects.
    • Understand the implications of systemic operational risk, including cyber risk, and what model methodologies can be employed to model such risks.
    • Understand the role of NBFIs, and how to monitor and assess the risk they may pose for financial stability. 

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