Establishing a Top-Down Framework for Evaluating Banks

• Country risk: Key ratios for analysing country risk
• Industry risk
• Bank specific, e.g.: ownership, support levels, customer base

The Role of the Central Bank and the Supervisor

• The functions of the central bank
• The role of the supervisor and methods of supervision

Analysing the Non-Financial information

• Differences between bank and corporate analysis
• Risks faced by banks

A Structure for Analysing the Financial Information

• Understanding the main items on the balance sheet
• Trading book/banking book
• Non-performing loans
• Off-balance sheet items
• Reliability of different sources of funding
• Review of a bank's profit and loss account: Interest income, non-interest income, operating costs and impact of provisioning on profitability
• Overview of main differences between UK GAAP and IFRS
• Ratio analysis for banks: Capital adequacy, asset quality, profitability, liquidity and efficiency
• The CAMEL analysis framework
• Gap analysis: Interest rate gaps and asset/liability maturity gaps

Capital Adequacy

• The importance of capital
• Capital adequacy ratio
• Risk weighting of assets
• Off-balance sheet weightings
• Regulatory capital: what is Tier 1, Tier 2, Tier 3?
• Value at Risk
• Basel II amendments to capital adequacy rules

Bank Failures

• Spotting warning signs: Financial and non-financial
• Why do banks fail?
• Examples of bank failure