Stress Testing Challenges at a Glance
40%
Estimated increase in problem loans under new AQR disclosure standards versus the current IFRS.
ORGANISATIONAL SILOS
The cost of cleaning data and aggregating results will be very high, especially if the frequency of the stress tests increases.
3-20
Range of people in dedicated teams, depending on bank size, tasked with defining objectives and governance guidelines and ensuring proper coordination among the business, risk, and finance departments.
DISCLOSURES
What is crucial now in Europe is for the banks to not fail the tests in the coming months under the new supervisory regime of the ECB.
80%
Amount of potential internal stress testing resources consumed by regulatory stress testing requirements, according to market participants in 2013.
PROCESS
Stress testing methods and analytical outcomes need to be consistent with how financial institutions think about risk and reporting, and at the same time meet the regulatory guidelines.
HIDDEN EXPOSURES
Having an enterprise-wide stress testing framework that acknowledges both traditional stress testing analysis and reverse stress testing is a game changer for financial institutions.
100
Number of people (or more) involved in the regulatory stress test exercise reported by some banks.
$25T
Total assets held by insurers, indicating they could become significant lenders in the coming years.
$393B
Total assets held by insurers, indicating they could become significant lenders in the coming years.
MACROECONOMIC PERSPECTIVE
Developing deterministic scenarios in forecasting and stress testing to reveal threats to the economy requires three macroeconomic scenarios.
140
Number of banks affected by the AQR, across several European jurisdictions.
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