Frank Manahan, Managing Director, Advisory, KPMG LLP; Marc Irubétagoyena, Head of Group Stress Testing and Financial Synthesis, BNP Paribas; and, Thomas Kimner, Head of Global Marketing and Operations, SAS, recently participated in an expert forum in Risk and Compliance magazine on the Evolution of Stress Testing. Read more to find out their thoughts on questions such as:
- Could you outline some of the key developments shaping the stress testing environment in recent years? How would you describe the evolution of stress testing as a governance tool in the US and Europe?
- What insights have regulators and financial institutions (FIs) gained from the results of recent stress tests, such as those conducted in the EU by the European Banking Authority, and the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) exercises in the US?
- What are some of the main issues and challenges involved in the stress testing process?
- What strategies are global and regional FIs deploying to cope with the complexity of the tests, related disclosure issues and the demand for additional exercises?
- What advice would you offer to FIs on improving their capital planning processes? To what extent is there a greater need for more efficient data and modelling platforms, alongside enhanced governance activities?
- How should FIs approach the task of integrating stress testing into their governance systems and structures?
- With the efficacy of stress testing always in question, how confident are you that the frameworks used and calibration of scenarios is as robust as possible? Do you expect the next round of stress tests to provide a better insight into banks’ resilience, strategic decision making and appetite for risk?
- What are your predictions for the future of stress testing as a useful method of assessing the resilience of FIs to a hypothetical adverse event? How do you expect the process to evolve and improve?