6 JANUARY 2016– NtInsight® is an integrated solution that supports the banking stress test.
From the viewpoint of macro prudence, institutions have been implementing enterprise-wide stress testing (CCAR/DFAST) in the U.S.A. since and even before crisis. FRB requires BHCs (Bank Holding Company) with consolidated assets of more than $50 billion to submit annual capital plans for review. Notably, A BHC may not make any capital distribution if the FRB objects its capital plan, which is supposed to be supported by the stress testing results.
NtInsight®, Numerical Technologies’ solution for stress testing, features:
Economic Scenarios Capabilities
The system runs simulations under each scenario and captures the corresponding effects on balance sheet, EV (Economic Value) and NII (Net Interest Income). The scenarios can be specified as:
- Supervisory scenarios: baseline, adverse, severely adverse;
- User/BHC-defined scenarios: baseline, stress;
- Scenarios created by external ESG (Economic Scenario Generator).
Planning and Portfolio Dynamics
Planning feature allows portfolio dynamics over the forecasting horizon by automating user-defined investment and financing decisions under the simulated market environment. The capital adequacy is then assessed by simulated financial statements and key performance indicators after taking business plans into account. Other popular risk indicators such as LCR for liquidity risk management can also be calculated in the similar way.
Integrated Risk Assessment
As FRB recently remains on course to lift interest rates, it can be told that market risk factors such as interest-rate risk and currency risk are inevitably correlated. NtInsight® performs a forward-looking stress test, taking correlations among various risk factors and risk types (e.g. market risk, credit risk, prepayment risk) into consideration for a realistic analysis.