Syllabus of CAIIB Compulsory Paper - II : BANK FINANCIAL MANAGEMENT

Compulsory Paper - II : BANK FINANCIAL MANAGEMENT

MODULE - A: International Banking

Forex Business; factors determining exchange rates, Direct and indirect quotations, spot /forward rates, premium and discount, cross rates.Basics of forex derivatives; forward exchange rate contracts, Options, Swaps. Correspondent banking, NRI accounts Documentary letters of Credit - UCPDC 600, various facilities to exporters and importers. Risks in foreign trade, role of ECGC, types of insurance and guarantee covers or ECGC. Role of Exim Bank - Role of RBI and exchange control - Regulations in India, Role and rules of FEDAI - Role of FEMA and its rules.

MODULE - B : Risk Management

Risk-Concept - Risk in Banks - Risk Management Framework - Organisational Structure - Risk Identification - Risk Measurement / - Sensitivity - Basis Point Value (BPV) - Duration -Downside Potential - Value at Risk, Back Testing - Stress Testing - Risk Monitoring and Control - Risk Reporting -Market Risk identification, Measurement and management / credit risk - rating methodology, risk weights, eligible collateral for mitigation, guarantees; credit ratings, transition matrices, default probabilities, Credit risk spreads, risk migration and credit metrics, Counterparty risk. Credit exposures, recovery rates, risk mitigation techniques, - / Operational and integrated Risk Management - Risk management and capital Management – ‘Basel Norms – Current guidelines on risk management.

MODULE - C : Treasury Management

Concepts and function; instruments in the treasury market, development of new financial products, control and supervision of treasury management, linkage of domestic operations with foreign operations.

Interest rate risk, interest rate futures Mix / Pricing of Assets, Liabilities - On-Balance Sheet Investment and Funding Strategies - Stock options, debt instruments, bond portfolio strategy, risk control and hedging instruments. Investments - Treasury bills, money market instruments such as CDs, CPs, IBPs Securitisation and Forfaiting; refinance and rediscounting facilities. Derivatives - Credit Default Swaps / Options.

MODULE - D : Balance Sheet Management

Prudential norms-Capital Adequacy. Implementation of ‘Basel Norms guidelines : RBI guidelines. Banks Balance Sheet - Components of assets / Liabilities / ALM Implementation -RBI Guidelines - Gap Analysis Mechanics, Assumptions, and Limitations - Illustrations of

Actual Gap Reports - The Relationship Between Gap and Income Statement – Funding Liquidity - Trading / Managing Liquidity - Contingency Funding - Business Strategies : Profit and profitability analysis, Asset Classification - provisioning - effect of NPA on profitability, Shareholder value maximization & EVA- profit planning-measures to improve profitability. Disclosure guidelines.