Stress testing: CCAR and EU-wide
Banks have to comply with increasing challenges to meet stress testing requirements from the supervisors. In the US, banks have to deliver their inputs twice a year to the Fed and in Europe banks need to prepare for the 2016 EU-wide stress test.
The approaches to stress testing are very different from the established through-the-cycle (TTC) model approach of banks to feed the IRB regulatory capital calculations and are much more data intensive.
Consistency and being interactive for non-quants
Our LoanPilot™ suite of credit models not only help banks to project multi-year rating migrations, defaults and losses with observable macro factors at pool and/or loan level, it also keeps it consistent with existing modelling approaches for Basel 2, Solvency 2 and IFRS 9 lifetime allowance. This will save institutions a lot of time, money and reduces confusion. Furthermore LoanPilot™ is very interactive with the business, which helps the qualitative assessment process under CCAR and the creation of narratives for scenario design and risk identification.
We also provide a large library of stress test models based on 2014 EU-wide stress test. The coefficients of these models can be used as additional inputs in LoanPilot™ to make the model more robust, meeting the additional data challenges for stress testing.
Derived coefficients between Default and GDP during the EU-wide stress test.