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What Regulators want to Satisfy Stress Testing Requirements

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Question: 
What do regulators want us to check for to satisfy stress testing requirements?
Answer: 

We hear different things based on the kind of portfolio a bank has and what shape it is in. While regulators have different criteria for each state, they generally are concerned about concentrations. Lately, too high a real estate ratio or high concentrations in specific geographic areas are getting the most attention.

Experience tells us that reporting and regulatory guidelines are changing at such a rapid pace than what was needed for last year’s exam is usually quite different that what the regulators require today.

Ideally, your credit risk solution should include multiple capabilities including concentration analysis, spreading, stress testing as well as “what if” and goal seek scenarios on an individual obligor basis or across an entire portfolio.

First published on BankersOnline.com 3/09/09

First published on 03/09/2009

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