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"Notes from Marcus Evans ERM in Banking Conference NYC"
"Stress Test Notes from the presentation of a SVP at a large US Bank"
"
Common challenges in the industry in developing
enterprise-wide stress tests
Maintaining deep historical data, with good data quality.
• Drilling down to the “right” level of granularity of the models.
• Having well-defined Stress Testing…"
Common challenges in the industry in developing
enterprise-wide stress tests
Maintaining deep historical data, with good data quality.
• Drilling down to the “right” level of granularity of the models.
• Having well-defined Stress Testing…"
"
Learnings around Stress Testing (cont’d)
• You need to continually strive for the right balance of
quantitative analysis (e.g., modeling) and qualitative analysis
(e.g., expert/fundamental credit analysis).
• A risk management culture is enhanced…"
Learnings around Stress Testing (cont’d)
• You need to continually strive for the right balance of
quantitative analysis (e.g., modeling) and qualitative analysis
(e.g., expert/fundamental credit analysis).
• A risk management culture is enhanced…"
"
…But remember that Stress Scenarios are developed
to be applied across all risk types.
Macro Scenario – Variables
• GDP.
• Unemployment.
• Home Prices.
• Credit spreads.
• Consumer Price Index.
Risks
• Credit, Market, Operational, Liquidity,…"
…But remember that Stress Scenarios are developed
to be applied across all risk types.
Macro Scenario – Variables
• GDP.
• Unemployment.
• Home Prices.
• Credit spreads.
• Consumer Price Index.
Risks
• Credit, Market, Operational, Liquidity,…"
"For example, for Credit Risk, there are a number of models/methodologies that can be leveraged:
Risk Rating models – mapping macro economic variables to
the drivers of capital for each risk (e.g., in the case of Credit
Risk, the drivers are PD and…"
Risk Rating models – mapping macro economic variables to
the drivers of capital for each risk (e.g., in the case of Credit
Risk, the drivers are PD and…"
Learnings around Stress Testing• Expanded Stress Testing activities are good for the business(i.e., good risk management), and a necessary component ofan Internal Capital Adequacy Process (ICAP).• Coordinated bank-wide stress tests need to have a…
"1. Lack of clarity with rules and regs
2. Getting buy in from all lines of business
3. Modeling accurately
4. Sheer size of many institutions
"
2. Getting buy in from all lines of business
3. Modeling accurately
4. Sheer size of many institutions
"
From a high level overview, all of the institutions agreed that the regulatory agencies are still trying to get a handle on the latest legislation and this was echoed by a senior level person from the FDIC - "that one year after Dodd Frank, the…
"From a high level overview, all of the institutions agreed that the regulatory agencies are still trying to get a handle on the latest legislation and this was echoed by a senior level person from the FDIC - "that one year after Dodd Frank, the…"
"Dear Oscar . . . thanks so much for the question and a promotion to Dr. My Grandmother will be very proud of me. :) This question covers a little slice of risk that is an important part of ERM - The conference really took a top down approach, so…"
"Hello Johnny - there were 50 participants in the conference, ranging from top global institutions to a $900M USD community bank. The conventional wisdom was a combination of a&b. Many of the firms employed their own talent to model, build and…"
"key conference topics
Make a business case for Enterprise Risk Management to ensure senior management and board of director buy-in for ERM initiatives
Shift from a siloed risk management approach to an ERM strategy that includes credit,…"
Make a business case for Enterprise Risk Management to ensure senior management and board of director buy-in for ERM initiatives
Shift from a siloed risk management approach to an ERM strategy that includes credit,…"
GlobalRisk Community - I will be reporting from the Enterprise Risk Management in the Banking Industry Conference this Thursday and Friday in NYC.....I will be posting the session topics later, so you will be able to direct specific questions to…
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