A guide to reverse stress testing A typical stress test creates a scenario and evaluates how a bank would fare under it. Compared to reverse stress testing, conventional stress tests are used to assure shareholders, regulators and customers that the capital on bank balance sheet
ICAAP and ILAAP European guidelines. What is ICAAP? Internal Capital Adequacy Assessment. Internal Capital Adequacy Assessment Process (ICAAP) is an internal review requirement that evaluates capital adequacy, capital management and planning at banks with a specific focus on core risk factors. Expected to be reviewed
Asset Liability Management Training Guide. 3rd Edition. The brand new, revised 3rd edition of the ALM Study Guide is out. With 190 pages, 189 figures and illustrations, the new edition weighs in at thrice the size of the 2nd edition and spends more time on
Bank Asset Liability Management (ALM) – Default ALM strategies. In our last post we looked at a history of US Treasuries yield curve shifts between 1978 and 2010. We now move to a simplified analysis of the maturity distribution of assets and liabilities on a
A visual history of USD Treasury yield curve shifts – 1978 – 2014. While we have spent a fair bit of time discussing Asset Liability Management models, we really haven’t spent enough time discussing interest rates. Specifically the historical behavior of US Treasury yield curve.
A short review of stress testing regulatory frameworks. Stress testing is evaluating the impact of large, expected as well as unexpected shocks on a bank’s capital. With the global financial crisis of 2008, EU debt crisis, Libor scandal and rampant rogue trading, it has become
Probability of Shortfall and Expected Shortfall with or without Basel III – Financial Risk Management Training Course – Day Three Update
Jawwad Farid Every since the Basel and BIS Committee that formulates the Basel Standard announced a preference for exploring an alternate metric for Risk Management there has been a resurgence of interest in Shortfall methods. There has been a renewed focus on research some led
Building Maturity Liquidity profiles for Deposits and Advances book for ALCO (ALM), ICAAP IAS 30 reporting
The mandate of the ALM (ALCO) committee has increased with changes in the Basel II framework to accommodate liquidity and funding concentration concerns. Commonly known as Basel II extensions or the Basel III framework, the changes put a renewed focus on liquidity coverage ratio and funding concentration. To be fair both interest rate mismatch and liquidity profiling were already areas of focus under the original Pillar III Internal Capital Adequacy Assessment Process requirements.
Two new online video based courses that cover the topics of Asset Liability Management (ALM), Capital Adequacy and Stress Testing at an intermediate level. The Stress Testing, ALM & Capital Adequacy Crash Course includes over 500 minutes of video instruction, while the shorter ALM & Capital Adequacy course covers the basics of both topics in under 150 minutes.
Stress testing refers to a process through we which we try and assess the impact of abnormal and extreme conditions on our processes, control systems and organizations.
Within financial services stress testing takes a second dimension where the focus shifts from assessing impact to identifying breaking points; the maximum amount of stress a financial institution would be able to bear before it breaks down and fails. The level of interconnectivity between financial markets and institutions has made this threshold of failure even more important since a since the failure of a single institution can trigger a deep and painful system wide crisis that can very easily turn into a regional or global contagion.