Concentration Risk and Large Exposures Management

This programme provides comprehensive coverage of concentration risk identification, measurement, and management, including the regulatory framework for large exposures and practical implementation strategies for SME banks. Participants will understand different types of concentration risk, develop measurement frameworks, and implement effective limit and monitoring systems. The course addresses both Pillar 1 regulatory requirements and Pillar 2 concentration risk management expectations.

SME banks often face particular concentration challenges given their typically focused geographic and sectoral coverage. The programme provides practical guidance on managing these inherent concentrations whilst maintaining effective risk management and regulatory compliance. Special emphasis is placed on the interaction between concentration risk and other risk types, including credit risk, market risk, and operational risk.

Participants will:

• Master concentration risk identification and measurement techniques
• Understand large exposures regulatory framework and compliance requirements
• Implement comprehensive concentration risk limit frameworks
• Develop effective monitoring and reporting systems
• Navigate practical challenges of concentration risk management for SME banks
• Integrate concentration risk management with broader portfolio management

• Concentration Risk Framework and Types
  • Definition and sources of concentration risk
  • Name, sector, geographic, and product concentrations
  • Regulatory framework: Pillar 1 large exposures and Pillar 2 requirements
  • Supervisory expectations and assessment approaches
• Measurement and Assessment Methodologies
  • Herfindahl-Hirschman Index and concentration ratios
  • Granularity adjustments and portfolio risk measures
  • Stress testing for concentration risk
  • Economic capital allocation for concentration risk
• Large Exposures Regulatory Framework
  • Connected clients and group of connected clients determination
  • Exemptions and calculation methodologies
  • Reporting requirements and regulatory monitoring
  • Breach management and remediation strategies
• Risk Management and Governance
  • Concentration risk appetite and limit frameworks
  • Portfolio diversification strategies
  • Risk transfer mechanisms and credit derivatives
  • Board and senior management oversight
• SME Bank Specific Considerations
  • Managing inherent geographic and sectoral concentrations
  • Relationship lending vs. diversification strategies
  • Capital implications and business model considerations
  • Integration with ICAAP and stress testing frameworks