Comprehensive Balance Sheet Stress Testing

Global Financial Markets Intelligence

To ensure we meet your expectations and maximise your return on training investment, we favour a classroom/workshop style set

To ensure we meet your expectations and maximise your return on training investment, we favour a classroom/workshop style set up for the delivery of our courses. Please note we have therefore limited number of spaces available and these will be assigned on a first come, first accepted basis. We recommend early booking to avoid disappointment.

“ Develop and execute a comprehensive approach to Stress Testing through a highly interactive and hands on learning experience. Design and apply a macroeconomic stress test to a synthetic bank and analyze the impacts across the investment and loan portfolios, the pricing and volume of deposits, and stress the off-balance sheet income and expense line items ”

How will you benefit?

Stress testing of balance sheet exposures has long been a prudent risk management practice at financial services firms.   Despite spanning several risk dimensions, including credit risk, interest rate risk (“IRR”) and liquidity risk, the recent financial crisis revealed weaknesses in the scope, use and integration of stress testing practices.   In considering how to address these and other weaknesses in the financial system, Congress passed the Dodd-Frank Wall Stress Reform and Consumer Protection Act (“DFA”) in July 2010; this act (as well as several subsequent regulatory pronouncements) codified specific requirements for formal stress testing activities, including which macroeconomic scenarios are to be analyzed, which methodologies are to be used, the integration of risk factors, how modeling assumptions are to be set, comprehensive results reporting as well as clarifying expectations for governance and use.

Most organizations found that they were not prepared to meet the heightened stress testing standards.    In general, risk management functions were not integrated and factor-specific analysis was not combinable in any meaningful way. Exacerbating this challenge, most vended balance sheet modeling solutions were not designed to address the new modeling requirements. In short, ALM models were unable to dynamically model credit risk and credit risk systems did not address the rest of the balance sheet and did not typically have dynamic simulation capabilities. Neither of these systems was integrated with a fully-specified macroeconomic scenario generator and neither addressed data deficiencies which were endemic. As a result, multiple systems were patched together to compute an assessment of capital adequacy, but close review of model output usually revealed the need for significant qualitative adjustments to model projections. These were due to a combination of weak models, inadequate or poor quality data and weak integration of balance sheet and income statement risk impacts. Best practices confirms that the granular and consistent application of stress scenarios across current and forecast business activities and positions is a prerequisite for producing results that are accurate, transparent and useful in the management of balance sheet risk.

The course and associated case study have been specifically designed to allow participants to understand how to meet the unique requirements of DFAST and CCAR balance sheet stress testing.   The simulation model allows users to consolidate individual product models into a full balance sheet and income statement simulation engine in order to provide for the consistent treatment of all quantitative and qualitative aspects of stress testing simulation.   In each behavioral model, credit and market risk are considered within competing risk frameworks. Each of the behavioral and production models is calibrated to the historical performance of the asset class. The course covers all of the core components needed to satisfy regulatory stress testing requirements, including fully-specified macroeconomic scenarios, cash flow models for all loans and securities, econometric modeling of new business, non-interest income and non-interest expense, risk-weighted asset (“RWA”) and capital ratio calculations, FR Y-14 and custom

reporting, documentation and all Internal Capital Adequacy Assessment Process (“ICAAP”) qualitative requirements needed to satisfy use tests.

About your expert trainers:

James Haught. CFA, FRM

Jim brings over 15 years of risk, stress and capital experience in DFAS and GSIB banks. Most recently, he was the Global Head of Capital at State Street with responsibilities that included coordinating the CCAR submission, producing the Capital Plan, designing and running the ICAAP for the organization, building the risk adjusted performance framework for the lines of business, and leading all capital actions. He is well experienced with all Basel regimes, Economic Capital, and stress testing including the forecasting of those measures. Before joining State Street, he served in various risk and capital positions at RBS Citizens, including leading quantitative teams responsible for credit modeling and pricing. Jim began his career as a Surface Warfare Officer in the United States Navy. He received his MBA from the University of Rhode Island and is a Chartered Financial Analyst.

David Green, PhD, CFA

David Green brings lessons learned in a 20 year career spanning banking, bank regulation, consulting and software development to bear on a broad range of risk and balance sheet management problems.

He is currently working with Gresham Risk Partners implementing market-leading stress testing solutions.   He served as the Treasurer at BankUnited. the largest bank headquartered in Florida. Dr. Green was responsible for the investment portfolio, funding and derivatives, secondary marketing, FTP, and asset/liability (A/L) management. He was also the A/L Manager at SunTrust Bank where he built and managed the interest rate risk models for the bank and worked to coordinate a number of business functions including budgeting/forecasting, funds transfer pricing and strategic balance sheet management.

Dr. Green is a former Chairman of the Georgia Bankers Association's Asset/Liability Management Committee.   He also served as a Bank Examiner at the Federal Reserve Bank of Atlanta, where he also spent two years in research while completing his PhD. He was Chairman of Bancware's (division of SunGard Data Systems) US Client Advisory Council for many years.

Dr. Green holds a PhD in Economics from Georgia State University, a BS in Applied Mathematics from Georgia Tech and is a CFA charter holder. He is a frequent speaker at banking and risk management conferences.

Pre-course questionnaire:

A detailed questionnaire will be sent to all course participants to establish exactly where the group training needs lie. The completed forms will be analysed by the course leader/trainer and followed by telephone if further clarification is required. As a result we can guarantee that the course is pitched at exactly the right level and that the issues that you regard as relevant are addressed. The course material will reflect these issues and will enable you to digest the subject matter after the event in your own time.

Who should attend?

This course is intended to benefit all members of a depository institution’s stress testing, capital management and credit modeling teams .

  • Appreciate how stress testing can serve uses beyond the regulatory requirements and improve the management of risk within the organization
  • Learn how to model a full business under stress
  • See how poorly constructed models lead to inaccurate and potentially fatal results
  • Understand how to mitigate some of the unique challenges of stress
  • Review practical case studies highlighting best practice approaches to stress modeling

    marcus evans specialises in the research and development of strategic events for senior business executives. From our international network of 63 offices, marcus evans produces over 1000 event days a year on strategic issues in corporate finance, telecommunications, technology, health, transportation, capital markets, human resources and business improvement.


    Category: Forex

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