Risk management essentials for banks

The risk management sector has been undergoing an unprecedented evolution as the result of the financial crisis that started in 2008. In particular, financial institutions and regulators alike have become more and more demanding as to what they expect from the risk management function in general and the risk manager in particular. The demands are becoming so important that it has become very hard to combine this role with another function within a bank or an investment firm.

The above has been made even more visible and acute since the advent of the Eurozone’s Single Supervisory Mechanism (SSM), also known as ‘Banking Union’, where the regulatory and supervisory expectations are particularly high. The SSM may be more visible for so-called ‘significant banks’ but is also applicable to all Luxembourg-based banks regardless of their size.

In this context, PwC Academy has summarised in this course the different subjects and regulations applicable today. The key aspects are the likely revision of the expectations in terms of Internal Capital Adequacy Assessment Process (ICAAP) and the introduction of the Internal Liquidity Adequacy Assessment Process (ILAAP).

By the end of this training, participants will be able to:

• describe the concepts underpinning banking union (SSM, SRM, BRRD, DGSD etc) and how these connect with the Supervisory Review & Evaluation Process (SREP);
• have a good understanding of the supervisors’ expectation in terms of structure and content of both ICAAP and ILAAP;
• identify the issues impacting the firm’s business and be in a position to take appropriate actions.

• Essentials of banking union
  • Brief overview of the various building blocks of banking union and how these impact banks
• Focus on the Supervisory Review & Evaluation Process (SREP)
  • The SREP is a highly formalised and regulated process that imposes how supervisors should assess banks in terms of business models, risk control framework, internal governance, capital, liquidity and funding
  • This section will elaborate on what exactly is assessed and how banks can best prepare for the exercise
• Internal Capital Adequacy Assessment Process (ICAAP)
  • Essentials of Pillar 2 as per CRD IV/CRR
  • Reminder of key features of CSSF circular 07/301 on ICAAP
  • Deep dive on how such features are impacted by the SSM’s expectations and how these will lead to a likely revision of ICAAP expectations
• Internal Liquidity Adequacy Assessment Process (ILAAP)
  • Brief reminder of the ILAAP’s ancestor: CSSFcircular 09/403
  • Focus on key ILAAP features: structure, contents, guidance based on SREP expectations
  • Lessons learned from The Netherlands where an ILAAP has been required from banks for a number of years

This training will be coordinated by Jean-Philippe Maes, Partner at PwC Luxembourg.

Jean-Philippe Maes is a partner with over 15 years of expertise in Basel III, regulatory reporting, risk management, and internal governance, including Basel IV preparation. He has supported banks, investment firms, and management companies in implementing regulatory frameworks and managing risks from operational to internal models, including COREP/FINREP reporting. Recently, his focus has been on risk appetite frameworks and non-financial risks such as climate, conduct, and reputational risks. Jean-Philippe has led significant projects like designing recovery plans, conducting governance reviews, and training over 600 bankers. He is also a frequent speaker and represents PwC at Luxembourg’s Banks and Bankers’ Association Banking Supervision Committee.