STRESS TESTING & GOVERNANCE

Stress-testing Applications & Risk Modeling

Today, ensuring adequate capital allocation levels by means of stress-testing is common practice for larger financial institutions. From a modeling and software development perspective, stress-testing introduces new - and recurring - challenges. Let us help.
We have built three stress-test applications for as many major Dutch insurance and banking institutions, in co-operation with big-four consulting firms or under our own steam. In MATLAB and in Python. From inception to implementation:

• Solvency II | Re-engineered Moody's Solution
• Credit Risk | Advanced IRB
• ALM - Net Interest Income | EBA & ICAAP

In addition, we have also been involved in projects focusing on Economic Capital and IFRS 9 reporting, from a software development perspective. The latter included key risk parameters like regulatory RWA, expected losses and IFRS 9 provisions. Focusing on scalable software architecture, performance and automation, we live up to the challenges of increasingly complex and computationally intensive analyses. Quality-assured and flexible solutions, offering agility amidst rapidly evolving regulatory environments.

Keeping workflow integration in mind, automated report generation and database connectivity utilities are readily available. If required, interfacing with other environments is also supported.

We can assist at every step of your stress-test application development / deployment, from turn-key solutions to project support and refactoring / conversions. We are used to liaise with Risk Advisory consulting firms, blending domain with software expertise, a proven win-win business proposition for our customers. Contact us to explore the possibilities.

Model Governance

Introduction

Risk models have been around for a long time, often including some kind of process to manage their life-cycles. Partly in response to the credit crisis of 2008, the discipline of Model Governance is becoming more regulated and formalized. In addition to requesting model results, regulatory authorities are now interested in core understanding of the models themselves, their validation processes and underlying data quality. Case in point is today's ECB TRIM initiative. Its largest, single supervision operation to date.

As a consequence, and reflected by TRIM objectives, increased scrutiny is expected in the areas of Model Governance and Model Risk Management. Model inventories, audit-able methodology/data validation processes and detailed guidelines must be in place, as a matter of course. In addition, institutions must adequately respond to a host of additional requests:

• Can you fully reproduce historical model runs used for reported capital requirements?
• Is the underlying data still available, can I audit their data integrity tests?
• Where are overrides used? Which ones, and why?
• Can I audit model evolution over time?
• What is the root-cause of variations in results: data or model code?
• Who is using which versions of the models, how often and for what purposes?

We can help. MonkeyProof modelSafe adds critical Model Governance capabilities to your environment, by hosting your model portfolio. Check our solutions.

ECB TRIM

The ECB launched TRIM to identify the causes of variations in calculated capital requirements among banks, stemming from internal models. The objective is to reduce this variability and to restore confidence in internal models. Expect the TRIM impact-phase to involve stricter Model Governance and Model Risk Management awareness. Are you prepared? Contact us.

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