July 2024

Welcome to our monthly newsletter, your go-to source for the latest in the banking industry. Each edition features expert analysis, upcoming workshops, a special focus on our Slovak language workshop, and engaging quiz questions to test your ?? industry knowledge. Stay informed, enhance your skills, and connect with the banking community.

1. Insightful Reads from the Banking World

Stay Updated with the Latest in Asset & Liability Management, Bank Regulations, Risk Management and More. Discover Recent Articles, Blogs, and Podcasts from the Banking Industry shared by Bearning

• We published a nice blog on critical components of ALM, including interest rate risk management, liquidity management, and credit-spread risk management. In this blog, we also discuss tailored approaches for different bank sizes and markets, emphasizing the importance of proper modeling of non-maturing deposits (NMDs). Read the full blog here ?? https://www.dhirubhai.net/pulse/importance-proper-asset-liability-management-alm-banks-martin-macko-mgiof/

• We shared a must-read article by Bank Policy Institute ?? that sheds light on a critical issue in the banking sector - the efficiency of bank supervision. The author meticulously argues that current supervisory practices in the U.S. often overlook significant risks while focusing on less material matters. He uses many concrete figures and well-researched resources to back up the claims. Read the full article here ?? The Bank Examination Problem, and How to Fix It - Bank Policy Institute (bpi.com)
• Last but not least, ?? another must-read, now for all ALM & Market Risk managers: The revised IRRBB standards. It's concise, and changes are clearly marked. For example, significant changes for EUR interest rate shocks (parallel shock increased from 200 to 225 basis points, short curve end from 250 to 350, and long end from 100 to 200!). Read the full text of IRRBB standards' update here: Recalibration of shocks for interest rate risk in the banking book (bis.org)

2. Workshops and E-Learning Updates

Explore Upcoming Sessions, Recaps of Recent Workshops, and Our E-Learning Offerings

• ??? Bank Management Live Online Course (October 15, 2024, 9:00 AM - 4:00 PM CET): You can master financial bank management, learn banking, financial markets, key ratios, strategic planning, and risk management during live using of our SimBa (simulated bank) Excel model with professional lecturer. Sign up and enjoy e-learning chapters, a certificate opportunity, and a 1-day live online session!

• ?? Prolonged Summer Discount 40%! ?? We prolonged our huge summer discount of 40% ( use coupon code SUMMER40 ) on our E-Learning Bundles till the end of August! ??

Which bundles are offered with the summer discount 40%?

1. All E-learning Courses Bundle offers comprehensive courses and tests on essential banking topics, including finance, management, strategy, treasury, risk management, and regulation. This bundle features the Bearning Tests & Certificate Course along with all individual courses, allowing you to achieve a certificate from each chapter individually. Ideal for banking professionals aiming to enhance their expertise and credentials.
2. Bearning Tests & Certificate: This comprehensive course is designed to transform your understanding of banking principles and practices, making you an expert in the field. With over 1000 carefully crafted questions and detailed explanations, you'll gain the knowledge and confidence needed to excel in your banking career.
3. The Banking and Financial Management Bundle includes seven comprehensive e-learning courses covering bank management, strategies, controlling, quantitative planning, funds transfer pricing, asset & liability management, treasury, financial markets, and bank regulation. Earn a Bearning Certificate from each course by passing the final exams, showcasing your expertise in essential banking topics.

• ?? Digital Money Live Online Course (October 16, 2024, 9:00 AM - 4:00 PM CET): Learn more about digital finance through our Digital Money course, comparing fiat money, cryptocurrencies, stablecoins, CBDCs, and covering blockchain technology and related global regulations. This course is catered to bank and product managers.

3. Spotlight: Live Workshops in Slovak or Czech Language

Online Bearning na?ivo v slovenskom a ?eskom jazyku

Bearning kalendár verejnych online kurzov na jeseň e?te pripravujeme, niektoré v?ak majú u? teraz naplánovany dátum ??. Obsah kurzov a prihlásenie nájdete na na?om bearning.sk webe.

Bearning workshopy pokryvajú ?iroké spektrum finan?nych tém vrátane riadenia aktív a pasív, finan?nych trhov, regulácie a riadenia rizík, privátneho bankovníctva a investovania. Okrem toho poskytujeme ?kolenia na témy fintech a digitalizácia, kyberkriminalita, AML a dodr?iavanie regulácie (compliance). V?etky kurzy sú dostupné ako verejné online kurzy alebo inhouse pre in?túcie. Pre viac informácií nav?tívte na?u slovenskú stránku bearning.sk.

4. Banking Industry Quiz

Test Your Knowledge with Bearning Monthly Bearning Banking Quiz ?????

? How do banks typically determine the maturity assigned to non-maturing deposits (NMDs), such as current accounts?

A) By using the contractual maturity date

B) By applying a fixed industry standard maturity period (typically O/N, i.e. 1 day)

C) By analyzing historical customer behavior and deposit stability

D) By matching the maturity with the bank's longest-term loan

???? We are pleased to publish the correct answer and explanation for the quiz question in our next newsletter issue.

5. Quiz Solution Corner

Review and Learn from Last Month's Quiz

? Question: Which primary risk must a bank consider when investing in government bonds with a fixed coupon?

A) Liquidity risk

B) Credit risk

C) Interest rate risk

D) FX risk (if the bond is in a foreign currency)

CORRECT ANSWER: C) Interest rate risk

Explanation:

When a bank invests in government bonds with a fixed coupon, the primary risk it must consider is interest rate risk. Here's why:

1. Interest Rate Risk: This is the risk that arises from the possibility of changes in interest rates. When interest rates rise, the market value of existing fixed-coupon bonds falls because new bonds are issued with higher yields, making the older, lower-yielding bonds less attractive. Conversely, when interest rates fall, the market value of existing fixed-coupon bonds rises. For banks holding these bonds, fluctuations in interest rates can lead to significant changes in the market value of their bond portfolios, impacting their financial statements and regulatory capital.
2. Liquidity Risk: While this is a consideration for any investment, government bonds are generally highly liquid, meaning they can be quickly and easily sold in the market or used to borrow money in a repo transaction, e.g. with central bank. Therefore, liquidity risk is typically lower for government bonds compared to other types of securities.
3. Credit Risk: This is the risk that the issuer of the bond (in this case, the government) will default on its obligations. Government bonds, especially those from stable, developed countries, are considered to have very low credit risk. Thus, this is not the primary concern for banks investing in such bonds.
4. FX Risk (if the bond is in a foreign currency): This risk applies only if the bond is denominated in a foreign currency and the bank would buy the foreign currency on FX market. It would then involve the potential for loss due to changes in exchange rates. However, banks usually borrow foreign currency for bond investments on money market, e.g. in an FX swap transaction, where there is only very small or none FX risk. So FX risk is not the primary risk in this context unless otherwise stated.

Therefore, interest rate risk is the primary risk that must be considered when investing in government bonds with a fixed coupon.

?? Do you want more banking quizzes and tests with detailed explanations? Sign up for our Bearning e-learning platform, where you'll find over 1000 questions ?? with explanations and the opportunity to earn a certificate. Many parts of our e-learning courses are free, including a variety of texts ??, quizzes, and insightful explanations.

For more information, visit our websites: bearning.com and bearning.sk. Follow us on LinkedIn and stay updated with the latest in banking education and workshops. Contact us at: [email protected]