Biggest challenges with stress testing
Sageworks polled 74 U.S. bankers to determine the biggest challenges that institutions have with starting or completing stress testing analysis in their institutions. The respondents were attendees of a Sageworks webinar held on May 2, 2013, and institutions ranged in size from $66 million in managed assets to $290 billion.
According to the poll’s results, the biggest obstacle to easy and timely stress testing is the amount of time and staff required for the analysis. More than 36 percent of respondents cited this as the biggest challenge.
The second biggest obstacle is confusion about the process or requirements for stress testing, as set out by federal examiners. A portion of the webinar (a recording is available here) was devoted to reviewing and comparing different stress testing regulations, in an attempt to mitigate this confusion and to clarify the expectations that examiners have for banks of different asset sizes and governed by different regulatory bodies.
Another challenge that was identified during the poll was insufficient data. Bottom up stress testing, in particular, requires loan-level detail for the concentrations to be stressed. Given that collateral, financial and payment data may all be kept in disparate sources, aggregating the required data into a single platform can be an arduous first step towards stress testing the portfolio. Download this whitepaper: Solving Data Challenges in Loan Portfolio Stress Testing.
To learn more about stress testing, download our recent whitepaper, “Stress Testing: The Who, What, When and Why,” or access the recording of the webinar during which this poll was conducted, “Stress Testing the Loan Portfolio.”
Sageworks Stress Testing, helps institutions perform bottom up stress tests on their riskiest concentrations. Watch a demo to find out more.