Stress Testing

ICAAP: Credit Risk: Stress Test: Profitability Analysis of a bank’s loan portfolio

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1 min read

In this post we will go through the step-by-step methodology of carrying out a profitability analysis of the bank’s loan portfolio. This in itself is a kind of a stress test for credit risk under the Internal Capital Adequacy and Assessment Process (ICAAP) as it also computes a worst case profitability scenario.

ICAAP: Credit Risk: Stress Test: How to Determine Expected Classification Rates

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1 min read

In this post we will consider how to derive expected classification rates for “current” customers of a loan portfolio. This is used to calculate the expected “current” customers who will be classified within the next period, which will in turn be used in the quantification process of credit risk under the Internal Capital Adequacy and Assessment Process (ICAAP).