Key Pillars of Risk Management in the Banking System: ICAAP and ILAAP
The Internal Capital Adequacy Assessment Process (ICAAP) and the Internal Liquidity Adequacy Assessment Process (ILAAP) are fundamental mechanisms for assessing banksā capital and liquidity. These processes are crucial for capital and liquidity management, ensuring regulatory compliance, and providing guidelines for the bankās long-term sustainability.
Regulatory Framework
- FBA & ABRS: Decision on the internal process for assessing capital and liquidity adequacy with guidelines
- Guides from the ECB (ECB Guide to the Internal Capital Adequacy, ECB Guide to the Internal Liquidity Adequacy)
Add Your ICAAP: The Basis for Capital Adequacy AssessmentHeading Text Here
- Assessment of capital from both economic and normative perspectives
- Assessment of internal capital and regulatory requirements
- Exposure to material risks in the medium term
Challenges in ICAAP Implementation
- Identification, measurement, and control of significant risks
- Stress testing
- Defining internal capital
- Compliance with regulatory requirements
- Preparation of ICAAP and ILAAP reports
Add Your ILAAP: The Foundation for Liquidity Adequacy AssessmentHeading Text Here
- Assessment of funding structure
- Liquidity stress scenarios
- Maintaining adequate liquidity reserves
ILAAP Key Regulatory Points
- Framework for managing liquidity risk and funding sources
- Strategy and plan for funding sources
- Collateral management and internal liquidity requirements
- Allocation mechanisms and intraday liquidity management
- Liquidity stress testing
- Liquidity Contingency plan
- Supporting documentation
Integration of ICAAP and ILAAP into Strategic Management
- Integration of results into business plans and decisions
- The role of control functions in strengthening transparency
- Preparation of comprehensive ICAAP and ILAAP implementation reports
- Challenges with human resources (missing or fluctuations)
Program: ICAAP & ILAAP
A practical overview of the application of both processes, with international examples and specifics of the regional market (BiH, Montenegro, Croatia, Serbia). The program includes:
- Interpretation of key regulatory requirements
- Application of EU guidelines (ECB, EBA)
- Identification, measurement, and assessment of significant risks
- Stress testing
- Determination of internal capital and liquidity requirements
- Linking capital, liquidity, and strategic management
- Preparation of documentationĀ
Program Objective
To empower participants to improve capital and liquidity management, reporting quality, and institutional resilience to stress scenarios.
Who is the program for?
- Risk managers
- Finance and ALM functions
- Control functions (RM, IR, Compliance)
