Credit Modelling (2nd edition)

Credit Modelling (2nd edition)

Adapting to Basel III and the Financial Crisis (2nd edition)

The financial crisis that began in 2007 has led to a sea-change in the regulation of the banking and insurance sectors. The impact of the economic environment and the regulatory changes on financial institutions is unprecedented.  In response to the deficiencies in financial regulation revealed by this crisis, the Basel Committee on Banking Regulation set their global regulatory standards for banks in stone in the form of the Basel III guidelines, published in December 2010. 

Insurance companies, which are increasingly regulated like banks, have been implementing the Solvency II Directive in Europe or its components in North America (which are considered parallel to the Basel guidelines). Both the banking and insurance sectors will be affected by Phase II of The International Financial Reporting Standard (IFRS), providing common ground between the two. Adapting to Basel III and the Financial Crisis presents an integrated view of these two industries, providing the reader with a comprehensive guide to the complexities of the new regulations while focusing on solutions rather than problems.

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As a result of Basel III and Solvency II, all financial institutions will have to re-think their business planning and strategic management practices whilst also trying to meet their income needs.  Adapting to Basel III and the Financial Crisis examines how the financial sector is tackling these challenges, drawing on a variety of examples from the banking and insurance industries.

Bogie Ozdemir and Peter Miu combine their experiences in banking, insurance, and academia, providing a balanced combination of both hands-on experience and theoretical reasoning. The authors demonstrate how best to implement these regulations on a practical level, explaining the organizational (re)alignments to ensure that the necessary changes are made. 

The authors equip the reader with the tools to enhance their capital management and business mix optimization processes in order to cope with the rigors of the new regulatory landscape, with key topics including:

•    Integrated Capital Management; 
•    ICAAP and ORSA Design;
•    Risk Appetite;
•    Economic Capital for Defaulted Loans;
•    Performance Management;
•    Capital Planning and Budgeting;
•    Economic Capital for Insurance Companies;
•    RAROC and Loan Specific Hurdle Rate;
•    Evolving Role of the Risk Function and Organization Re-design; and
•    Procyclicality Management.

Adapting to Basel III and the Financial Crisis is aimed at all risk and capital management practitioners in banks and insurance companies, as well as national and international regulators of financial institutions and Basel II, Basel III, and Solvency II implementing practitioners.

More Information
ISBN 9781782720003
Navision code MADA
Publication date 31 Mar 2017
Size 155mm x 235mm
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Bogie Ozdemir

Bogie Ozdemir is the Vice President of Sun Life Financial Group, responsible for the Enterprise Economic Capital, Operational Risk, Model Vetting, Risk Analytics, Risk Policy, and Economic Scenario Generation groups. Until recently, he was the Vice President of BMO Financial Group where he was responsible for Economic Capital, Stress Testing, and Basel Analytics, and jointly responsible for ICAAP.  Previous to this he was the Vice President of Standard & Poor’s Credit Risk Services group where he was globally responsible for engineering new products and solutions, and business development and management.

He has co-authored many papers such as “Practical and Theoretical Challenges in Validating Basel Parameters: Key Learnings from the Experience of a Canadian Bank” and “Basel Requirement of Downturn LGD: Modeling and Estimating PD & LGD Correlations” both published in the Journal of Credit Risk, “Estimating and Validating Long-Run Probability of Default with respect to Basel II Requirements”, published in the Journal of Risk Model Validation in 2008, and more recently “Information asymmetry and bank regulation: Can the spread of debt contracts be explained by recovery rates?”, published in the Journal of Financial Intermediation in 2012. In 2008, Bogie also co-authored a book titled Basel II Implementation: A Guide to Developing and Validating a Compliant, Internal Risk Rating System.


1 Environmental Forces: Economic Instability, Low Interest Rates, Change in Demographics, Continuing Regulatory Changes and Digital Evolution

2 Current Practices and their Shortcomings in Risk, Capital, Business-mix and Performance Management

3 Evolution of Economic Capital Measurement and Management

4 Integrated Capital Management: ICAAP and ORSA

5 Procyclicality Management: Developing a Coherent Risk

Framework for Risk Management, Capital Management, Stress Testing and IFRS 9 Purposes

6 Capital Optimisation and Business-mix Management

7 Performance, Profitability Management and Hurdle Rate

8 Optimal Management of the Interest Rate Risk in the Banking Book

9 Prudent LGD Estimation for Mortgages

10 Developing and Implementing Effective Fintech Strategies

11 Implementing IFRS 9 by Adapting AIRB Models

12 Organisational (Re)alignment