Ways to Leverage Portfolio Stress Testing Results
While megabanks have stringent and detailed portfolio stress testing requirements, many community banks and credit unions have received little prescriptive guidance on how to effectively stress test the loan portfolio. While stress testing is widely accepted and purported by examiners to be a critical component of a “sound risk management framework”, expectations and use cases for stress tests aren’t obvious.
- The importance of leveraging portfolio stress testing results
- Feedback from examinations that clients are permitted to share
- How bottom-up and top-down stress testing results can influence capital adequacy, risk management, and lending decisions