FRSGlobal

FRSGlobal RiskPro ALM Stress Testing Demonstration

This webinar was the second in a series of webinars designed specifically for Chief Financial Officers of U.S. banks. This was be a live interactive demonstration of the FRSGlobal RiskPro ALM module, using actual bank data that has been pre-populated within the chart of accounts. In this webinar FRSGlobal regulatory expert, Andrew Liegel, showed sample models that have had missing stress elements and what needs to be corrected in a model to properly take into account micro and macro stresses and the impact that they have on the earnings of a business unit as well as the bank as a whole.

Among the topics demonstrated:

• The creation of an advanced sensitivity gap analysis using a browser-based interface with quick drop-down menus.
• When it is appropriate to use a static ALM analysis and when a dynamic (new business volume) model should be used, and how the report outputs can be configured for comparable purposes.
• How price shift analysis and volatility shift analysis should be combined in a model to produce normal, stressed, and “black hole” gap scenarios (and what are the ramifications of improper combinations).
• What are the different analyses of a model that need to be viewed in terms of risk decomposition, chart of accounts, and earnings at risk when using dynamic simulations.
• The elements of a drop-down menu that are needed to be added to most risk models to ensure more accuracy in forecasting cash flows.
• How micro and macro stresses need to be linked to Net Interest Income (NII) simulation outputs for the entire balance sheet.

Attendees saw the simulations in the real-time stress testing environment of the RiskPro ALM module. Andrew showed many of the time sequences and stress scenarios that were neglected by banks over the past 3 years during the financial crisis.