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How Finalyse can help
Stress Testing
The European Regulators (EBA) oblige banking institutions to take part in a multitude of different regulatory stress tests. The requirements for the stress tests change frequently and are becoming more and more stringent – putting pressure on our clients as regards their ability to follow and model changes in the requirements.
Stress testing is also an important tool for any institutions to understand its risks, Finalyse is ready to help its clients understand their tail risks and hidden vulnerabilities using also reverse stress testing approach.
How does Finalyse address your challenges?
Analysis of the stress testing regulatory requirements (scenarios including macroeconomic variables) and their applicability
Modelling the scenarios and conducting an impact assessment to gauge the performance of the existing models and identifying outliers
Assessment of portfolio dynamics and portfolio weaknesses in extreme but plausible events as well as identification of concealed correlations in portfolio
Supporting the Internal Capital Adequacy Assessment Process (ICAAP) for all asset classes
Ensuring sound governance processes and control mechanisms relating to stress testing
Generating simulation toolkits for model validation and business users
How does it work in practice?
For regulatory stress test, the regulator’s material is analysed. For non-regulatory stress tests (including reverse stress tests) we seek to tailor our approach to your needs. Based to the above the model gets built and run through all the necessary scenarios. The results are then analysed and interpreted as regards to their impact on the Internal Capital Adequacy Assessment Process (ICAAP) as well as on other impacted items that may be of interest to the client.
Key Features
- Regulatory check/compliance
- Model review
- Covers numerous risk types
- ICAAP impact
- Thorough documentation
Our subject matter experts
Maciej is a Senior Consultant with 4 years of experience in credit risk model development and validation. Maciej has extensive knowledge of Pillar 1 and 2 related models gained on projects completed for clients across Europe and the Middle East. He was a vital part of projects focusing on Credit Risk Economic Capital model development, AIRB LGD model development, but also PD, LGD & CCF models validation under the IFRS 9 context.
Kingshuk Bhattacharjee is a Senior Consultant with more than 13 years of experience in risk management, data analytics and statistical modelling. Kingshuk is an active member of Finalyse Stress Testing Centre. He has been involved in conceptualisation and development of stress-testing models using methodologies like Sensitivity analyses, Scenario analyses, Macroeconomic scenarios etc.