The “Top Down” whole approach to portfolio stress testing is sometimes the appropriate starting point in determining if further analysis is needed. To illustrate this, a quote from an OCC’s Supervisory Guidance Release entitled “Community Bank Stress Testing” released 10/18/12:
“For most community banks, a simple stressed loss-rate analysis based on call report categories may provide an acceptable foundation to determine if additional analysis is necessary.”
As with CEIS’ other services, our detailed and transparent analysis is the foundation of the engagement. With portfolio stress testing, we will segment the portfolio into pools with similar loss characteristics, develop “stressed” loss rates for each segment, calculate stress period loss amounts (minimum 2 year timeframe), estimate the earnings impact, and apply the earnings impact to Tier 1 Capital with both pre- and post-stress capital ratios.
Contact Us today to learn more about out “Top Down” stress testing program.