Fundamentals of modeling cash flows of old-style commercial banks for financial modelers lacking FIG background.
Commercial banking as a business is very specific. It’s different from standard manufacturing, or merchandising, or services. Thus if you’re a modeler with background in modeling mainly manufacturing companies, and banking model is your next project, you need to learn the specifics of banking before diving in. This tutorial article will help you do just that.
This tutorial article provides you with the fundamentals of operating modeling for banking in line with good modeling practices. You will learn how to build a correct fully integrated commercial banking model meeting basic regulatory requirements.
The model you’ll arrive to in the end will be a simple yet capable tool for capturing key interrelations in the commercial bank’s cash flow analysis. You’ll be able to build on it in any way you want, like valuation, FP&A, and more, as your project involves.
Author(s): Alexander Korotkov
Publisher: anxtream.com
Year: 2023
Language: English
Pages: 39
Tags: financial modeling; tutorial; commercial banking; Basel III; banking regulation; banking valuation; risk-weighted assets (RWA); leverage ratio (LR); liquidity coverage ratio (LCR); net stable funding ratio (NSFR)
Acknowledgements
Executive summary
Introduction
Banking 101
Background
Regulation
A simple banking balance sheet model
Capital adequacy requirements
Risk-based ratios
Non-risk based ratios
Liquidity requirements
LCR
NSFR
Banking cash flow financial models
Step 1: Plain vanilla commercial banking model
Step 2: Adding credit risk accounting
Step 3: Adding regulation: capital
Step 4: Adding regulation: liquidity
Bonus step: Adding valuation
Conclusion
About the author
About the attached models
Color codes in the document
References
Notes
