US financial institutions with $10 billion of assets or more must undergo stress testing as mandated by the Dodd Frank Act. Institutions with $50 billion of assets or more face an even more rigorous program, known as Comprehensive Capital Analysis and Review (CCAR) stress testing.
CCAR and Dodd-Frank Act Stress Testing (DFAST) exercises are performed periodically, and require financial institutions to produce forward-looking projections for credit losses, balance sheet/income statement and other variables, based on forward-looking scenarios for various macroeconomic variables. The projections must be mathematically appropriate and useful for business decision making. Models must be well-designed, validated, controlled, and fit for the specific purpose of stress testing.
Protiviti’s Model Risk team has performed a large number of model validations and model developments for models for stress testing, for a large proportion of institutions required to provide CCAR and DFAST submissions. Our work spans all relevant business units and purposes, including models used to project credit losses, revenues, income, allowance, risk-weighted assets, and other balance sheet items.
Because of our focus on quality, our work has been well-received by our clients and by the regulatory community.
Our areas of expertise: