Dodd-Frank Act Insight

The Federal Reserve has released its 2015 CCAR scenarios. Mark Zandi and the Moody’s Analytics team dissects the CCAR scenarios, and considers possible narratives driving them and their probability of occurring.

Presenter: Mark Zandi

Date: February 2, 2016
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In this webinar we look at the evolution of credit loss forecasting since the start of DFAST and how stress testing capabilities can be leveraged to comply with upcoming changes related to impairment accounting (CECL and IFRS 9).

Authors: Emil Lopez, Anna Krayn
Date: September 22, 2015

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On July 17th, the Federal Reserve Board (FRB) issued a notice of proposed rulemaking (NPR) for the 2016 and 2017 Comprehensive Capital and Assessment Review (CCAR) exercises.

Authors: Jacob Grotta, Cayetano Gea-Carrasco, Anna Krayn, David Little
Date: August 13, 2015

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This presentation discusses how senior management can leverage stress testing for improving their bank's performance.

Authors: Cayetano Gea-Carrasco
Date: February 24, 2015

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Some of the pushback we’ve had from internal and external validators and the Fed during the last round of Comprehensive Capital Analysis and Review is that stress-testing models need to be very simple. Tony Hughes, senior director for consumer credit at Moody's Analytics, discusses that while it's important for bank managers to understand their stress testing models, the potential for these models to yield deep insights will be lost if we oversimplify them.  

Author: Tony Hughes
Date: May 15, 2013

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In this article, adapted from the original Moody’s Analytics whitepaper, "Loss Reserves are Falling, But They Could Soon Be on the Rise”, Community Banks are offered an analysis of how they can use the Financial Accounting Standards Board’s (FASB) proposed updates to accounting standards in regard to allowance for credit losses (ACL) from December of 2012 to their competitive advantage. The systems and processes that can help banks comply with the new standards can also be leveraged to improve how they do business.  

Author: Christian Henkel & Jan Larsen
Date: April 12, 2013

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Basel III stresses the integration between liquidity and credit risk, and the need to manage both from an enterprise-wide risk-management context. This demands a new enterprise-wide organization of tasks, processes, and calculation infrastructure, specifically in terms of systems integration, data flow coordination, model validation, and data interfacing. This paper analyzes the key challenges institutions face when optimizing the capital ratio calculation and outlines ways they can overcome them.

Authors: Cayetano Gea-Carrasco, Mikael Nyberg, Pierre-Etienne Chabanel and Pierre Gaudin
Date: May 14, 2013
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Depending on your point of view, regulations can be viewed as a hindrance or a compliance cost. However, hidden in the pending regulations being mandated in the global financial service sector is an opportunity to leverage regulatory investment into business gains. Download this article and discover the ability to leverage the expenditure on data analytics to capture enhanced business value consistently over a longer term. A well-structured data analytics infrastructure could pay for itself in ways more than one.

Author: John Baer
Date: March 21, 2013

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In this article, Thomas Day, Senior Director at Moody’s Analytics, provides an insightful summary of the 2013 Dodd-Frank Act Stress Tests, and compares the results with the 2012 stress test. On March 7, 2013, the U.S. Federal Reserve System released the results of the 2013 Dodd-Frank Act Stress Test (DFAST). As expected, the overall result of the exercise reflects improvement in the overall capital strength of the industry, with an aggregate tier-1 common equity of 11.1% versus a 10.1% level for the 2012 stress test results.

Authors: Thomas Day, Cayetano Gea-Carrasco, Anna Krayn
Date: March 11, 2013

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In December 2012, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) released their proposed update to the accounting standards for the Allowance for Credit Losses (“ACL”). The standards are intended to address weaknesses in the prior guidance that were revealed by the financial crisis. Specifically, the guidance seeks to facilitate more timely recognition of likely losses, and also seeks to simplify the prior guidance by establishing a single standard for impairment. In this whitepaper, we argue that the banks who best adapt to the new standards will be at a competitive advantage, and not only because of the edge inherent in setting more accurate provisions. The same systems and processes that can help you comply with the new standards can be leveraged to improve a wide array of core business activities.    

Authors: Christian Henkel, Jan Larsen
Date: February 6, 2013

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Download this whitepaper to understand how Moody’s Analytics’ analysis derives the credit loss estimates for CRE loan portfolios held by CCAR firms. Our analysis estimates the expected nine quarter, cumulative CRE portfolio loss through the end of 2014 is 4.7% under the CCAR 2013 Severely Adverse scenario. In the current paper we discuss these results, and how we attribute the lower loss estimate compared to last year’s stressed scenario to a number of different factors.

Authors: Megha Watugala, Jun Chen, Kevin Cai
Date: January 9, 2013

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This presentation focuses on a Macro-Finance Approach: Option-Pricing vs. General Equilibrium, real world macro scenarios (assessing relevant risks in a forward-looking fashion), connecting macro factors with risk parameters, and connecting macro factors with credit parameters. This presentation also includes a case study of retail credit.

Authors: Dr. Jose Suarez-Lledo, Luca Magni
Date: May 29, 2012

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The Dodd-Frank Act (DFA) created several new regulatory agencies, shifted responsibilities among many existing agencies and eliminated the Office of Thrift Supervision. As a result, many financial institutions will be regulated by new regulators and the related, presumably more stringent, regulations. Thrifts will now be regulated by other banking agencies, the Federal Reserve, OCC or FDIC, depending on their charter. Read here for more details.

Date: March 1, 2011

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The Dodd-Frank Act, passed in July 2010, forms the basis of the U.S. government ‘s regulatory response to the financial crisis. Many consider it one of the most sweeping overhauls of financial regulation in recent U.S. history. In this article we examine its scope and look at how it differs from Basel III. Whilst is it primarily drawn up for the U.S banks with assets of over $500m, it may apply to others and it does apply to any US operations anywhere that are subject to U.S jurisdiction.

Date: March 1, 2011

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When the Dodd-Frank Act was passed it set new standards for risk based capital and leverage ratios that will have to be followed in the future. This article explains the different requirements for ‘well-capitalised’ and ‘adequately capitalised’ banks or systemically important non-bank finance companies and the minimum ratios that apply to them. The aim of this is similar in tone to basel III, and will take precedent over any previous Basel regulations in terms of capital requirement.

Date: March 1, 2011

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A further consideration thrown up by the Dodd-Frank Act is that of added supervision over issues of systemic risk. Regulation is defined for systemically important bank holding companies and systemically important nonbank finance companies in order to address any risk to the financial stability of the US posed by these institutions. Find out more about the regulations that relate to this here.

Date: March 1, 2011

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One of the aims of the Dodd-Frank Act is to help overcome the difficulties associated with producing accurate credit ratings and risk assessing complex structured products. Part of this process involves the requirement that U.S regulators reduce their reliance on credit ratings. This article shows the extent of the current use of credit ratings by the U.S regulators and the timeline by which certain ratings references will be removed.

Date: March 1, 2011

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John Baer, Senior Director of Product Management at Moody’s Analytics, tackles questions over banking regulations and the importance of commercial underwriting. He suggests that the need to use superior analytics and data management practices will be the key to making better pricing and loan decisions, as will transparent and up front processes and effective data.

Author: John Baer
Date: January 3, 2011

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