The 2008 financial crisis fundamentally reshaped the landscape of securitization, revealing critical weaknesses in risk management, due diligence, and regulatory oversight. For financial professionals, understanding these failures is not just a matter of historical interest; it is a vital necessity for building resilience and ensuring stability in today’s structured finance markets. This training course provides a comprehensive exploration of the crisis's key lessons, equipping you with the tools to identify, measure, and mitigate the complex risks inherent in modern securitized products.

This 10-day program is designed to move beyond theoretical concepts and focus on practical application, from enhanced collateral analysis to robust model governance. We will delve into the post-2008 regulatory frameworks and explore how they have changed the rules of engagement for all market participants. By mastering advanced stress testing, liquidity risk management, and the crucial role of transparency, you will be able to build a proactive risk framework that protects against future systemic shocks and positions you for success in the evolving world of structured finance.

Duration

10 days

Target Audience

• Risk managers and compliance officers
• Portfolio managers and fixed-income analysts
• Due diligence and credit analysts
• Structured finance professionals and underwriters
• Financial regulators and auditors
• Quantitative modelers and researchers

Objectives

• Understand the root causes of the 2008 crisis in the context of securitization.
• Analyze the key regulatory reforms enacted to address securitization risks.
• Master modern due diligence and collateral underwriting standards.
• Develop advanced modeling skills for credit, prepayment, and liquidity risks.
• Learn to design and execute robust stress tests and scenario analyses.
• Grasp the new role and responsibilities of credit rating agencies.
• Build a framework for comprehensive securitization risk management.
• Enhance transparency and reporting practices for securitized products.
• Identify and mitigate emerging risks in the current market environment.

Course Modules

Module 1: The Crisis Retrospective: What Went Wrong?

• An analysis of the key securitization-related failures leading up to 2008.
• The role of subprime mortgages and lax underwriting standards.
• The failure of credit rating agencies and reliance on flawed models.
• The amplification of risk through complex deal structures and credit default swaps.
• A critical review of the lessons learned and their impact on today's markets.

Module 2: Regulatory Reform and the New Landscape

• A deep dive into the Dodd-Frank Act and its impact on securitization.
• Understanding the risk retention rules and their implications.
• An overview of Basel III and its capital requirements for securitized assets.
• The role of new regulatory bodies and their oversight functions.
• Navigating the compliance challenges in the post-crisis era.

Module 3: Enhanced Due Diligence

• A framework for performing comprehensive due diligence on collateral.
• The importance of verifying underlying asset data and performance.
• Analyzing the origination and servicing practices of the issuer.
• Identifying red flags in deal documentation and legal opinions.
• Case studies of due diligence failures from the crisis.

Module 4: Collateral Quality and Underwriting Standards

• A review of modern underwriting standards for residential and commercial loans.
• The impact of a collateral's credit quality on the entire deal structure.
• Analyzing the credit metrics and risk factors of different asset classes.
• How to use historical data to benchmark collateral performance.
• The importance of ongoing monitoring of collateral pool performance.

Module 5: Structural Risk and Waterfall Mechanics

• An advanced look at the risks embedded in deal structures.
• The importance of the payment waterfall and its potential for failure.
• The impact of trigger events and performance tests on different tranches.
• Understanding the true purpose of credit enhancement and its limitations.
• Modeling the cash flow waterfall under various stress scenarios.

Module 6: Liquidity and Funding Risk

• Analyzing liquidity risk for both the originator and the SPV.
• The risk of a "run on the bank" in the structured finance market.
• The role of short-term financing (e.g., ABCP conduits) in the crisis.
• Strategies for managing funding risk in a volatile market.
• The importance of contingent liquidity facilities and backup plans.

Module 7: Prepayment and Extension Risk Modeling

• A deep dive into modeling prepayment behavior in the post-crisis world.
• The impact of new mortgage refinance programs on prepayment speeds.
• Understanding extension risk and its effect on bond duration.
• The limitations of standard prepayment models in a stressed environment.
• Building more robust models that account for behavioral and macroeconomic factors.

Module 8: Credit Risk and Loss Modeling

• Advanced credit risk modeling techniques for securitized portfolios.
• The importance of loss severity assumptions and their impact on tranches.
• Modeling correlations between different asset types and geographies.
• The role of stress-testing default and loss assumptions.
• Using vintage analysis to predict future losses.

Module 9: Model Validation and Governance

• A comprehensive guide to model risk governance and best practices.
• The importance of independent model validation.
• Documentation requirements for all models used in securitization.
• Addressing model limitations and assumptions.
• The role of back-testing and sensitivity analysis in model validation.

Module 10: Stress Testing and Scenario Analysis

• Designing effective stress tests that go beyond historical data.
• The importance of using "tail risk" and non-linear scenarios.
• The role of regulatory stress tests (e.g., CCAR, stress testing frameworks).
• A practical session on running and interpreting stress test results.
• Communicating stress test outcomes to senior management and investors.

Module 11: The New Role of Credit Rating Agencies

• An analysis of the post-2008 reforms at rating agencies.
• The limitations of credit ratings as a sole measure of risk.
• Understanding the new rating methodologies and their nuances.
• The importance of conducting independent analysis to supplement ratings.
• The risks of "ratings shopping" and how to identify it.

Module 12: Transparency and Data Reporting

• The new requirements for data transparency in securitization deals.
• The role of the European Securitisation Repository and other data sources.
• How to analyze and interpret deal performance data.
• The importance of clear and consistent reporting to investors.
• The challenges and benefits of increased data disclosure.

Module 13: Investor Protection and Communication

• The evolution of investor rights and protections post-crisis.
• The importance of clear and comprehensive prospectus language.
• Managing communication with investors during market stress.
• Addressing investor concerns regarding deal structure and collateral quality.
• The role of investor conferences and forums in the new environment.

Module 14: Emerging Risks in Securitization

• An exploration of new and evolving risks in the structured finance space.
• The impact of climate change and environmental, social, and governance (ESG) factors.
• Understanding cybersecurity risks and data privacy in securitization.
• The challenges of valuing and managing FinTech-originated assets.
• Preparing for the next potential crisis with a forward-looking risk framework.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 7 working days before commencement of the training.