Capital Adequacy Forecasting – Basel III Compliance Simulation

Click the image below to watch a short (40 second) video introduction to the project

This project is a simple forecasting tool that estimates whether a hypothetical financial institution would meet regulation requirements under various economic scenarios. It focuses on Basel III regulation and uses sample balance sheet inputs, SQL-based tier calculations, and basic scenario forecasting logic.

🛠️ How to Run This Project

This project is written in Python using a Jupyter Notebook.

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Run Locally (Recommended)

If you have Jupyter Notebook, VS Code, or Anaconda installed:

1. Clone the repo:

   git clone https://github.com/markizevbigie/capital-forecasting-microproject
   cd capital_forecasting_microproject

2. Open the notebook:
   • Launch Jupyter Notebook or VS Code
   • Open capital_forecasting_microproject.ipynb
3. Run all cells.
   • All required packages are standard, but see the “Dependencies” section below for exact versions or install the required dependencies with pip install -r requirements.txt

Key Features

• SQLite + SQL Magic in Jupyter
• Relational schema with foreign keys and realistic financial modeling
• Basel III ratio checks and tier-specific compliance logic
• Forecast scenario simulation (baseline, mild/severe recession, expansion)
• Use of CTEs, joins, and CASE logic for clear and auditable calculations

Tables

• business_units: Simulated departments (e.g., Retail Banking, Wealth Management)
• balance_sheets: CET1, AT1, Tier 2 capital vs. risk-weighted exposure
• forecast_assumptions: Scenario-based multipliers
• regulatory_requirements: Basel III minimums per tier

Why It Matters

This project demonstrates a working understanding of regulatory capital frameworks and the ability to implement robust SQL logic for real-world financial risk analysis.

Future Enhancements

• Add real data from 10-K/Pillar 3 filings
• Automate with Python or build out a front-end dashboard

Dependencies

This notebook was developed using the following dependencies:

• Python 3.11

• sqlalchemy==1.4.39 ✅ (Note: newer 2.x versions may cause errors)

• ipython-sql

• sqlparse