CCAR and Beyond
CCAR and Beyond
Jing Zhang
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Since the Supervisory Capital Assessment Program (SCAP) in 2009, the Federal Reserve has refined its expectations on capital assessments and stress tests to form the Comprehensive Capital Analysis Review – CCAR – an annual assessment and stress testing exercise to be performed by banks to rigorously measure whether they have enough capital to withstand another crisis.
The spread and breadth of CCAR continues to expand; originally designed for the largest bank holding companies in the US, the assessments are now being performed at smaller banks and regulators across the globe are eagerly watching the results unfold.
CCAR is widely considered to be the regulation with the greatest influence on banks’ risk management and business practices, mainly due to the approval of dividend issuance, share buy-back, acquisitions and other major corporate actions hinging on the outcome of these assessments.
CCAR and Beyond: Stress Testing, Capital Planning and Implications explores the modelling techniques key to CCAR and the business implications of the programme. Contributions from those directly involved in the implementation and regulation of these assessments provide a unique source of information and insight into the assessment practices.
Jing Zhang brings together industry experts in stress testing and capital assessment to examine the central issues surrounding CCAR including:
- the design and severity of the macroeconomic scenarios;
- C&I and CRE portfolio stress testing;
- market, counterparty and operational risks;
- pre-provision net revenue modelling;
- governance, and
- capital management.
Clarifying the various methodologies and techniques, this book is an essential companion for those implementing and performing these capital adequacy assessments and stress testing exercises.
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Table of contents
Introduction
Jing Zhang (Moody’s Analytics)
1.CCAR and Stress Testing as Complementary Supervisory Tools
Tim P. Clark and Lisa H. Ryu (Federal Reserve Board)
2. Financial Institution Perspectives on the Evolving Role of Enterprise-wide Stress Testing
Andy McGee and Ilya Khaykin (Oliver Wyman)
3. The Advancement of Stress Testing at Banks
Michel Araten (Credit Risk Capital Advisory)
4. Designing Macroeconomic Scenarios for Stress Testing
Mark M. Zandi (Moody’s Analytics)
5. Determining the Severity of Macroeconomic Stress Scenarios
Kapo Yuen (Federal Reserve Bank of New York)
6. Data, Analytics and Reporting Requirements: Challenges and Solutions
John P. Haley (Regions) and Thomas Day (Moody’s Analytics)
7. A Multi- view Model Framework for Stress Testing C&I Portfolios
Jimmy Yang and Kenneth Chen (Union Bank)
8. Stress Testing Credit Losses for Commercial Real Estate Loan Portfolios
Jun Chen (Moody’s Analytics)
9. Stress Testing and Retail Portfolios
Soner Tunay and Rosa Català (Citizens Bank)
10. Market and Counterparty Risk Stress Test
Eduardo Canabarro (Morgan Stanley)
11. On Operational Risk Stress Testing
Yakov Lantsman, Sabeth Siddique and Yan Shi (M&T Bank)
12. Quantitative PPNR Modelling
Amnon Levy (Moody’s Analytics)
13. Banks’ Governance and Controls over Internal Capital Adequacy Processes
David Palmer (Federal Reserve Board) and Paul Sternhagen (Federal Reserve Bank of San Francisco)
14. CCAR and Capital Management: Relationship with Economic Capital, Regulatory Capital and ICAAP
Dan Ryan and Pranjal Shukla (PricewaterhouseCoopers)
15. EU-wide Stress Test Versus SCAP and CCAR: Region-wide and Global Perspectives
Piers Haben, Caroline Liesegang and Mario Quagliariello (European Banking Authority)