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Stress testing: A benchmarking analysis of systemically important banks

Stress testing

Analysis of systemically important banks reveal the relationship between the stress testing process & the value derived from it by banks & regulators.

A benchmarking analysis of systemically important banks.

In the wake of the global financial crisis, increased regulatory focus has necessitated significant efforts by the largest banking institutions to develop and enhance their existing stress testing capabilities. Further, it has intensified the pressure on banks to demonstrate not only financial resilience under adverse conditions, but also the robustness of controls, processes and the overarching governance framework that supports stress testing.

Our recent benchmarking analysis of 19 systemically important banks (SIBs) stress testing practices reveals significant progress has been made in enhancing stress testing frameworks in recent year. However, diverging practices across regulatory exercises, their constant evolution and the structural differences versus internal approaches has made it difficult for banks to achieve high levels of efficiency and effectiveness.

We also identified key learnings for regulators, in particiular, taking a more coordinated and aligned global approach to regulatory stress testing exercises would significantly lessen the burden on banks thereby releasing resources to focus on internal risk management.

Stress testing: A benchmarking analysis of systemically important banks, explores how institutions currently approach and use stress testing within the business, the costs, challenges and future development plans, as well as the relationship between the stress testing process and the value derived from it by the banks and regulators.


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Infographic: Survey findings

Key findings and associated recommendations that we believe will enhance and improve the efficiency of the future state of stress testing at banks.

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Benefits of stress testing

Banks that can resolve the challenges of integration will benefit from the value and insight that stress testing brings to business decision-making.

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Current challenges and the need for automation

With the volume of data now available, banks continue to struggle with manual stress testing processes. Automation is required.

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Automation of stress tests and the use of models

There is a clear intention from banks to invest in systems and tools to increase the level of automation across stress testing.