Stress Testing

Assessment under Economic Stress Scenarios

Stress tests assess the behaviour of a financial institution under certain unfavourable market conditions. They are a regulatory requirement but also give the owners and management valuable insight into the risk structure of the bank’s portfolio. The main variable of interest is usually the stressed core tier 1 ratio. Results on more granular levels are also used for strategic decisions relating to the portfolio mix.

Our Approach

For a model to be meaningful, good statistical fits are required. But more importantly the model has to make economic sense. Fintegral’s team not only possesses a first class mathematical and financial background. It also has the necessary economic know-how. We have run several large scale projects for different regulatory stress tests in credit and market risk. Read more about CCAR and EBA stress tests here.

Our Experience

  • Writing firm-wide stress testing standards for a UK bank
  • Building and validating macroeconomic models for stress testing in a major UK bank
  • Building macroeconomic models for a national bank
  • Managing complex group-wide stress tests for the whole portfolio of a large UK bank and presenting results to senior management
  • Implementing major banking book stress test calculations for the book of a UK bank
  • Implementing top-down whole-book stress testing methodology for a major UK bank

Read more –  Fintegral Case Study: Stress Testing