Stress Testing: Latest Developments and Best Practice

Course Agenda

Wednesday 23 May

08.30 Coffee & Registration

9.00 Introduction: Stress testing in 2017 and beyond

  • Regulatory impetus for stress testing 
  • Results from EBA stress testing - How can you improve on 100%?
  • Analysing the Bank of England Nov 2017 stress test results 
  • Stress testing for capital adequacy and risk management
  • Overview of the quantitative and qualitative aspects of stress testing
  • Where is regulation heading? What has changed and what has stayed the same?
  • Stress testing regulations - PRA/Fed/BoE

10.30 Coffee Break

11.00 Model risk & validation

  • Regulatory developments in model risk management
  • Emerging and current best practice approaches to model risk management
  • Challenges in managing stress test model risk
  • PRA's model risk management principles for stress testing
  • Model definition and coverage of stress test models
  • Governance, roles & responsibilities
  • Validation and Independent review

12.30 Lunch 

13.30 Scenario analysis

  • How to identify key risks in the organisation
  • What are relevant stress scenarios?
  • How severe should a stress scenario be?
  • Scenario design
  • How to quantify the likelihood of a scenario
  • How will the banking industry react to the current rate environment

15.00 Coffee Break

15.30 Gaining business value from stress testing

  • Developing consistent approaches to make use of stress testing results
  • Risk mitigation and efficient use of capital 
  • Overview of drivers, impacts and stress testing types
  • Using stress tests in day-to-day business activities 
  • Impact on operations and financial performance 
  • Using stress testing results to improve strategic decision making 
Speaker: Cecilia Gejke, Former Head of Stress Testing, Nordea

17:00 End of day one

Thursday 24 May

9.00 Reverse stress testing

  • Why do the FCA want reverse stress testing?
  • Reverse stress testing requirements
  • Building a reverse stress test
  • Reverse stress testing for credit risk
  • Reverse stress testing for liquidity risk

10.30 Coffee Break

11.00 Stress testing under IFRS 9

  • Three stages of recognising impairment
  • Measuring expected credit losses
  • Frontloading loan losses at the start of recessionary scenarios
  • Scenarios definition and calibration
  • Probability weighting scenarios
  • Migrating assets through the three stage process

12.30 Lunch

13.30 Stress testing operational risk

  • Quantitative vs. qualitative models for stressing operational risk
  • Developing a methodology 
  • Best practice in operational risk stress testing
  • How to use peer data for operational risk models
  • Stress testing in conjunction with broader business environment and forecasting 
  • Review current guidelines and best practice approaches 
Speaker: Ruben Cohen, Independent Consultant

15.00 Coffee Break

15.30 Integrated stress testing

  • The generalised structure of risk type models
  • The links between economic capital, liquidity risk and stress testing 
  • Modelling intra- and inter-risk dependencies
  • Portfolio, balance sheet and off balance sheet projection models
  • Future improvements to firm-wide stress testing
Speaker: Ahraz Sheikh, Independent Risk-Modelling Consultant and author of Firm-wide stress testing and economic capital, published by Risk Books

17.00 Close of Course

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