The University of Southampton
Courses

MANG6169 Credit Risk and Banking Regulation

Module Overview

The module will develop understanding of the fundamentals of banking regulation, the risks it deals with and the way such risks impact banking operations with an emphasis on credit risk. It will explain the Basel Accords that underpin regulations, explain the key concepts for each type of risk being covered by the accords, explain the models that are behind those risks, and make the connections between Internal Ratings Based models and credit scoring and corporate rating.

Aims and Objectives

Module Aims

to cover the fundamentals of financial risk assessment in the context of the Basel Accords, studying concepts and models that are the basis of modern risk supervision and management. The module will cover the concepts of financial risk management, the roles of the bank and the supervisor in effective risk management at system-wide and operational level, the key concepts and measures that define expected and unexpected loss coverage, and an overview of the tools and methodologies that are used to obtain them.

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • key concepts in credit risk assessment, including internal ratings based modelling, recovery risk modelling, validation and stress testing;
  • the principles of the Basel Capital Accord.
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • demonstrate competence in qualitative and quantitative analysis of modern banking, problem solving, and the use of basic models used for provisioning and capital requirements.
Transferable and Generic Skills

Having successfully completed this module you will be able to:

  • demonstrate an ability to present your work through effective oral and written Presentations;
  • manage analytical skills related to the subject.

Syllabus

Session 1: Credit risk modelling, economic and regulatory capital. Review of corporate credit risk models, relationship with internal ratings based modelling, structural models, reduced form models. Review of consumer credit modelling Session 2: Basel New Capital Accord and the risks. Models for estimating probability of default in consumer, corporate and sovereign lending. Relationship with consumer application and behavioural scoring and input on choice of optimal portfolio. Market and Operational Risk. Session 3: Loss Given Default models, Exposure at Default models, validation and verification of parameter estimation. Stress testing why and how

Learning and Teaching

Teaching and learning methods

Lectures, tutorial, workshops.

TypeHours
Teaching12
Independent Study63
Total study time75

Resources & Reading list

Saunders and Allen (2002). Credit Risk Measurement. 

Shimko (2000). Credit Risk, Models and Management. 

Ong, M.K (2005). The Basel Handbook. 

Engelmann, B., Rauhmeier R (2006). The Basel II Risk Parameters. 

Thomas L.C (2008). Consumer Credit Models; Pricing, Profit and Portfolios. 

Gup B.E (2004). The New Basel capital Accord. 

Altman, Resti and Sironi (2005). Recovery Risk. 

Assessment

Formative

Questions and answers

Summative

MethodPercentage contribution
Coursework  (3000 words) 100%

Repeat

MethodPercentage contribution
Coursework  (3000 words) 100%

Referral

MethodPercentage contribution
Coursework  (3000 words) 100%

Costs

Costs associated with this module

Students are responsible for meeting the cost of essential textbooks, and of producing such essays, assignments, laboratory reports and dissertations as are required to fulfil the academic requirements for each programme of study.

In addition to this, students registered for this module typically also have to pay for:

Textbooks

Recommended texts for this module may be available in limited supply in the University Library and students may wish to purchase the mandatory/additional reading text as appropriate.

Please also ensure you read the section on additional costs in the University’s Fees, Charges and Expenses Regulations in the University Calendar available at www.calendar.soton.ac.uk.

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