Stress scenarios
Banks struggle to assess climate impact on op risk
Supervisors have provided less stress-testing guidance for op risk than for credit risk
Interest rate scenarios: skinny-dipping with the Fed
As US rates march upwards, Risk.net readers offer deeply diverging forecasts on the impact for markets through to 2024
Banks shock commodities by 1,000% in stress-test rethink
Energy price spikes force clearing firms to consider extreme or even ‘implausible’ scenarios
Banks relieved as EBA punts on dual-track stress tests
Hybrid approach for 2023 will see top-down models used to project net fee and commission income only
Erste sees provisions rising fourfold in gas embargo scenario
Vienna-based bank wargamed for an unlikely but devastating halt to Russian gas shipments
Liquidity risk down 34% at the OCC
Projected largest payment obligation set at $6.2 billion for Q1
Banks’ loan-loss forecasts diverge in BoE climate exercise
Dispersion of estimates for corporate impairments highlights variety of assumptions for modelling climate risk
Inflation scenarios, pt II: end of the party
Whether inflation rises or falls, crowd-sourced scenarios forecast huge range of outcomes
Liquidity stress-testing using optimal portfolio liquidation
A methodology to derive liquidation costs and times in OTC markets is proposed
OCC issued $6.1bn VM call in Q4
December options expiration behind highest VM call in six years
Severe but plausible – or not?
In this paper, the authors apply a measure of statistical unusualness, called the Mahalanobis distance, to assess the plausibility of the scenarios used in the Federal Reserve's stress tests.
BoE stress tests: Lloyds just 10bp above minimum CET1 ratio
Bank’s simulated core ratio was just 10bp above requirements at the worst point of a severe recession
Inflation scenarios: tail risks loom for US equities
Portfolios could lose more than one-third of their value if inflation stays high, suggests crowd-sourced scenario exercise
EU stress tests: BNP Paribas would bear brunt of trading losses
Losses from held-for-trading balance sheet would wipe out fair value book gains
New BoE climate risk scenarios spark race for extra data
Banks need information from clients or third parties to populate 1,760 stress test variables
Zurich’s Scott: don’t levy climate risk capital charges
Imposing set-asides based on stress tests “does not make any sense”, sustainability chief warns watchdogs
Rush to meet net-zero target could see Sonia, SOFR collapse
Policy inaction could halt benchmarks’ normalisation, BoE biennial exploratory scenario finds
New UK op risk rules elevate management over measurement
Under op resilience rules, firms must plan for all severe stresses, whatever their probability
Basel playing catch-up on climate risk, say experts
Individual regulators have already gone further in encouraging transition
UK seeks to take the lead on climate risk standards
New research centre intended to help UK financial firms build better climate risk models
In light of Covid recession, Fed eases stress test scenario
Real GDP projected to fall 4%. In 2020, the simulated drop was 8.5%
EBA stress test to gird banks for long Covid depression
Real GDP projected to fall -12.9% from baseline by 2023
Regional banks, FBOs found second round of Fed tests tougher
DB, HSBC, PNC, US Bancorp and TD Group saw their peak-to-trough CET1 ratio depletion increase most
Fed’s Covid stress tests strain top banks’ leverage ratios
Citi, Goldman, JP Morgan, Morgan Stanley all had projected post-stress SLRs below 5%