Through experience CEIS has concluded that most community banks’ core IT loan systems do not contain the financial data required to perform a valuable bottom up commercial real estate (CRE) portfolio stress testing exercise.
CEIS has developed a strategic approach to “bottom up” stress testing by gathering and using the pertinent transactional data during a Loan Review engagement for the CRE stress test.
Additionally, reviewing regulatory examinations and discussions with clients has consistently shown that regulatory expectations around CRE-related stress testing are focused on the development of a stress-testing process and framework on a granular loan level.
As a result of coinciding a commercial real estate portfolio stress testing program with a loan review engagement, a client is able to keep the process economical and manageable with little disruption to normal internal processes.
Conducting both the Bottom Up and Top Down stress testing approach is beneficial to stress testing results. By pairing the results from the CRE stress testing with the Top Down approach ensures more consistent results for the total portfolio concentration.
Contact us today to learn more about our “Bottom Up” commercial real estate portfolio stress testing program.