Banking companies have fixed their attention on the regulatory requirements of stress testing — particularly the 18 large U.S. bank holding companies that have already confronted this year’s Comprehensive Capital Analysis and Review administered by the Federal Reserve, and recently faced a July 5 deadline to submit their own midyear tests. All banking companies with assets of $10 billion and greater will have to submit results of company-run tests this fall, many for the first time.
Companies can best demonstrate to regulators a commitment to stress testing by applying results to a wide range of business and strategic decisions, including potential new business lines and products. Properly conceived, stress testing can also provide important insight into portfolio positioning, loan pricing, funding, and financial forecasts. Please click below to read a Sightlines InFocus by C. Erik Larson and David Samuels that explores how companies that focus on stress testing not only as a compliance exercise but also as a risk-management tool can discover tangible business benefits and dramatic improvements in their risk-based decision making.