A Challenge for banks, an opportunity for bank steering

Carrying out the regulatory stress tests in 2009, 2011 and most recently in 2014 was a challenge for most of the affected financial services providers because of low levels of automation, poor data quality, long processing times as well as insufficient model quality. Given this setting, many banks have started optimizing their stress-test architecture and processes.

Banking supervision has now concretized its expectations of banks’ stress tests – for both regulatory and internal stress tests – with new draft guidelines1. The compiled requirements, which affect the regulatory stress testing and, in particular, internal stress testing, are very detailed and comprehensive.

On one hand, these requirements will lead to additional implementation and maybe to the adjustment or relaunch of affected optimization projects. The complete transfer of the requirements of BCBS 239 into the stress-test infrastructure is just one example2.
On the other hand, the implementation of the requirements should lead to significant increases in the value of stress tests to overall bank steering as well as to improvements in the depiction of the bank within the Supervisory Review and Evaluation Process3. 

BearingPoint supports financial services providers in building an integrated stress-test framework, through the development, validation and documentation of the necessary models, the technical realization, as well as the integration of stress tests and inverse stress tests into bank steering.


1European Banking Authority, Consultation Paper - Draft Guidelines on stress testing and supervisory stress testing,
December 18, 2015, http://www.eba.europa.eu/-/eba-consults-on-draft-guidelines-on-stress-testing

2Basel Committee on Banking Supervision, Principles for effective risk data aggregation and risk reporting,
January 2013, http://www.bis.org/publ/bcbs239.htm

3European Banking Authority, Guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP),
December 19, 2014, http://www.eba.europa.eu/regulation-and-policy/supervisory-review-and-evaluation-srep-and-pillar-2/guidelines-for-common-procedures-and-methodologies-for-the-supervisory-review-and-evaluation-process-srep-

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