Description
In this seminar, we'll examine approaches to credit risk stress testing for community banks.
Background
What conditions could put an end to your bank? What could change enough to drain all your capital and loss reserves, so that your bank would fail? How deep, or how long, does a bad credit cycle have to be to have fatal consequences?
Those are important questions for shareholders, management, employees, communities, regulators, and deposit insurers. And the latter two in this list, the regulators and insurers, are looking for data-based answers, not hunches, not gut feelings, not educated guesses based on what has worked for you before.
Stress testing provides the answers to these crucial questions. And the answers give management the basis for key actions, from raising capital to reducing risk to pursuing mergers and acquisitions.
Agenda
In this seminar, we'll examine approaches to credit risk stress testing for community banks. Along the way, we will:
• Identify the characteristics of the "loan by loan" or "bottom up" approach, assessing its strengths and weaknesses.
• Identify the properties of a "pool" or "top down" approach, and its strengths and weaknesses.
• Walk through a stress testing example using "Terminal Risk Analysis" methodology (a pool approach), showing how an effective model can use the bank's own experience to establish base patterns of expected loss.
• Explain how banks with sufficient history to examine a complete economic cycle can create a truly informative worst-case scenario from their own data.
You can count on more and more rigorous stress testing requirements to migrate to smaller and smaller banks. Developing reliable and truly useful stress testing models will not only be expected by regulators, it is a powerful step forward in managing your bank toward a bright, sustainable future.
Benefits
This webinar will give you a deeper understanding of the purpose of stress testing, the approaches that are available, the advantages and disadvantages of different models, and how it can be applied to a bank's own data to paint a clearer picture of major potholes on the road to future financial success.
Who Should Attend
• Chief Financial Officers
• Chief Credit Officers
• Anyone involved in the development or management of ALLL