Capital Ratios: Computational Issues for Depository Institutions

Product Id IQW15C6593
Level Basic
Duration 90 Mins
  • Description
  • Why should you attend
  • Areas covered
  • Who will benefit
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  • All-Access Pass
Capital ratios are essential metrics for financial institution management and for regulators. The capital ratios measure the liquidity issue of the institutions. The webinar discusses the scarcity of capital for banks and bank holding companies. It explains how financial institutions are highly leveraged and the owners have little “skin in the game.” A review of call report ratios will verify these notions. The webinar also will focus on the four important Basel III capital ratios (CET1, Tier 1, Total and Tier 1 Leverage Ratio) as well as the regulatory determination for an institution to be:
  • Well-capitalized 
  • Adequately Capitalized 
  • Undercapitalized
  • Significantly undercapitalized 
  • Critically undercapitalized 
It also reviews the status of banks today. The webinar will explain the capital ratios and their importance to the Depository Insurance Fund (DIF). It will also review the Basel III capital computational process which results in the numerators for the four Basel III ratios on Call Report Schedule RC-R: 
  • CET 1 Capital-Line 19
  • Tier 1 Capital-Line 26
  • Total Capital-Line 35
  • Tier 1 Capital for Leverage Ratios-Line 26
Those numerators divided by risk-weighted assets on Line 40a for the first three ratios and Line 39 for the leverage ratio will also be discussed. 

Attendees should attend to learn: 

  • How scarce is capital at the nations largest banks?
  • How many banks are well capitalized?
  • What are the four key Basel III ratios?
  • What are the components leading to: 
           1.CET1 Capital Ratio    
           2.Tier 1 Capital Ratio             
           3.Total Capital Ratio
           4.Tier 1 Leverage Ratio
  • What are the five descriptions for capitalization?
  • What Call Report Schedule RC-R lines are used for the numerators and denominators for the four key ratios?
  • What constitutes a walkthrough Schedule RC-R that leads to the four ratios?
 
  • Explanation of scarce capital situation in US banking
  • Brief explanation of Basel III
  • Review of actual and required Basel III ratios
  • Computational process for computing the four key ratios
  • Walkthrough of Schedule RC-R with focus on numerators and denominator leading to the four key ratios
  • Explanation of important items that are part of the numerators and denominators
  • The risk-weighting approach for assets and off-balance sheet items used in the denominator
  • Senior bank management
  • Selected Directors on the Board
  • Financial expert on the Board
  • Call Report Reviewers
  • Call Report Preparers
  • Newcomers to banking
  • Seasoned bankers
  • Controllership personnel 
  • Audit committee members
  • Internal auditors
  • External auditors
  • Primary regulators
  • Risk managers
  • Corporate counsel

Paul J. Sanchez, CPA, CBA, CFSA, CGMA conducts a small CPA practice in Port Washington, New York. He is also the owner of Professional Service Associates (PSA), a consulting and professional training and development business servicing corporate clients (auditors, controllers, etc.), CPA firms, professional associations and others. He was an assistant professor at Long Island University - C.W. Post Campus as well as an adjunct lecturer at City University of New York. Prior to starting PSA, he was the Vice President-Professional Development for the Audit Division of a regional bank and Director of Professional Practices and Vice President of a money-center bank, where he directed the professional practice development and training for internal auditors. He also was on the technical staff of the Auditing Standards and Examinations Divisions of the AICPA. He practiced public accounting in the New York office of Deloitte where he also was a firm recruiter and in-house professional development instructor. He was an owner and auditing and accounting seminar leader for the Person/Wolinsky CPA Review Courses, a company that prepared candidates to pass the Uniform CPA Examination. He is a frequent lecturer and seminar leader for accounting, auditing, banking, risk assessment and other professional presentations. He is the author of the textbook, “Accounting Basics for Community Financial Institutions” (Financial Managers Society, 2nd edition, Chicago, 2009) and the “Ideas an Analysis Letter: The Sanchez Take” (see www.sanchez-psa.com). As a contributing author, his chapter on ‘An Auditor’s Approach to Risk-Based Auditing: What to Audit and When,’ is included in the textbook, “Effective Auditing for Corporates: Key Developments in Practice and Procedures,” (Bloomsbury Information, Ltd, London, 2012).

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