Stress Testing & Capital Assessment

Stress Testing and Capital Assessment

Key Components for Managing Risk

Stress testing and loss forecasting are key components for managing any risk management program. As regulators use stress testing as a key tool for measuring your bank’s viability, it can also be a source of competitive advantage for you to look more closely at the impact of different levers in your credit risk strategies. 

Leverage Analytics and Industry Expertise

We understand the importance of measuring capital adequacy, stress testing and loss reserve estimation reporting and have an extensive background in modeling, banking, risk management and simulation to our clients. 

We develop loss forecasting models using a combination of state of the art analytics and advanced statistical tools, and can evaluate and report the impact of the bank’s stress scenarios on the credit risk components – probability of default (PD), exposure at default (ED), and loss given default (LGD).

We have the unique ability to parallel the Federal Reserve's stress scenario methodology or design your own stress tests, linking the loss forecasting models and process in with the Basel metrics calculated in line with the requirements of the Advanced Internal Ratings Based (AIRB) approach for multiple portfolios, and with any other regulatory requirements.

Balance Business and Regulatory Drivers

It is imperative for you to understand the results of a stress test and evaluate strategic initiatives to help offset the potential impact by optimizing risk-weighted assets and capital usage. Our strategy consultants provide valuable insights into the likely implications of plausible economic stresses within your portfolio, and can serve as a useful benchmark for comparing the outcomes of other approaches. We can help to balance a complex array of business and regulatory drivers at the strategic and operational levels.

Related Banking Regulation Requirements

• Basel III and the Integrated Regulatory Capital Framework
• Comprehensive Capital Assessment and Dodd Frank Act Stress Testing (DFAST)