Stress scenarios
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 crowdsourced 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%
Covid-19 overwhelmed stress-testing models – banks
Risk USA: lenders forced to apply management overlays to models skewed by macro inputs
US election scenarios: meltdown fears if poll contested
Crowdsourced election scenarios show sharp falls and correlation breaks if Trump challenges results
BoJ stress tests pressure top banks’ buffers
Capital ratios of internationally-active dealers projected to fall to 7.6% in worst-case scenario
Fed set to unveil operational resilience proposals
OpRisk North America: banks expected to design idiosyncratic stress scenarios to test resilience
Hypothetical yield curve scenarios for credit stress testing
In this paper, we discuss a set of hypothetical yield curve shift scenarios generated by applying extreme value distributions and a shaping procedure. These statistically derived hypothetical stress scenarios could be susceptible to model risk, leading…
FICC default exposure exceeded size of clearing fund in Q2
Mortgage-backed securities division had $887 million of uncovered exposure to collapse of two members
Covid credit outlooks for UK banks vary
Standard Chartered and HSBC have worst downside outlooks relative to their own base cases
Fed’s second round of stress tests to push banks’ limits
Worst-case scenario sees unemployment peak at 12.5%
Banks aim to close op risk stress test capital gap
Standardising stress drivers could help smooth differences between bank loss estimates