Stress scenarios
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Should the ECB stress-test counterparty default risks?
The US Fed already does, but it is notable that EU banks were less exposed to Archegos
NSCC issued record $45bn cash call in Q4
Worst-case scenario estimate up 22% from previous quarter
Fed unveils hyper-Archegos test to reveal bank blow-up risks
CCAR for 2024 includes analysis of simultaneous defaults of five largest hedge fund clients
OCC default fund up 19% in Q3
Hypothetical stress losses behind latest spike in member contributions
Rule change cuts ECC default fund by over a third
Member contributions hit two-year low and may fall further
CME member contributions up 11%
Default fund for F&O clearing unit hits record size driving CCP’s skin-in-the game share to all-time low
Party’s over as more banks drop internal models for market risk
At least three systemic banks in Europe intend to ditch IMA for capital requirements
Execution & process errors: banks try to get beyond blunderdome
Mistakes mean more data for reporting, models and scenarios. But do banks learn from them?
UN climate risk chief calls for shorter-term stress tests
But banks say heavy modelling demands will take time to respond to adequately
Liquidity risk hits multi-year highs at both CME divisions
Changes to clearing member exposures and portfolio composition drive increases
OCC liquidity risk doubles to all-time high in Q2
Concentration of activity around June expiration responsible for record rise
Worst-case double default would have caused breach at CME
Stress loss based on hypothetical scenario was $390m higher than prefunded resources
The Fed’s stress test models are inaccurate. Something has to change
First step for US regulator to improve its bank loss forecasts would be to open up its models to public scrutiny, argue two banking industry advocates
Bankers call for overhaul of EBA stress tests
Support for multiple scenarios, but only if fixed assumptions and variables are scaled back
Do all roads lead to multi-scenario Fed stress tests?
This year’s CCAR faced criticism for underweighting the risk of higher-for-longer inflation
US banks’ stress-test projections stray further from Fed’s in 2023
Average gap between Fed- and bank-estimated depletions more than double from previous two DFASTs
Banks begin tackling climate stress tests of trading books
Market risk professionals see major shortcomings in available scenarios
DFAST mortgage loss rate doubles 2022 figure
At $6.9bn, JP Morgan would bear brunt of losses, according to Fed projections
Five banks lowballed loan losses in latest DFAST
Banks project $23bn smaller hit to loan portfolios, with Wells Fargo and Citi the most off-target