International Bank Subject to CCAR

BENCHMARK SCENARIO DESIGN

THE PROBLEM

  • Regulators criticized internal stress scenarios for not being severe enough for CCAR
  • Tremendous amount of time and resources were spent on scenario design, consisting of hundreds of variables
  • Time was running out to develop a challenger model that could solve the matter by the given deadline

THE SOLUTION

The bank used Straterix‘s effective challenge approach to verify their CCAR stress testing process:

  • A top-down ‘Reverse scenario analysis’ quickly discovered the necessary adjustments to internal scenarios that would produce adequate severity
  • Analysis took less than 4 weeks from start to finish for one of the world’s largest banks

THE BUSINESS CASE

  • Failure to address the problem may lead to failing CCAR
  • The second and third lines of defense who are responsible to raise red flags during the regulatory audit, had no effective analytical tools at their disposal

THE RESULTS

  • The adjustments that were needed for the internal scenarios, were discovered.
  • The bank learned which environments would be stressful specifically to them
  • The bank successfully passed CCAR
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