Loan Stress Testing for Today’s Banking Reality

Printer-friendly Version

---

 
The stress testing process significantly increases awareness of risk and the need for risk management principles. This presentation will assist community banks with understanding financial regulators’ expectations regarding stress testing.

Stress Testing of Individual Loans:  Implicit in the financial statement analysis is an assumption that the borrower’s financial condition will remain the same or improve.  Lessons learned from the current recession are that the economic conditions can change dramatically and that these assumptions will not be correct.  Regulators want to see a stress testing process that analyzes the borrower’s ability to withstand adverse conditions.

Stress Testing Portfolio Segments:  Stress testing explores the impact of an event (or combination of events) on the performance of various loan pools.  It assists financial institutions with identifying and measuring the level of credit risk in different segments of their loan portfolio, including an estimation of the portfolio's susceptibility to deteriorating economic, market, and business conditions.

Continuing Education: Attendance verification for CE credits provided upon request.

HIGHLIGHTS
•    Regulatory guidance on stress testing
•    Stress testing individual loans

•    During initial underwriting of a loan
•    Commercial loan annual reviews
•    Loan modifications and restructures
•    Watch/problem loans

•    Stress testing portfolio segments

•    Setting concentration limits
•    ASC 450 analysis for ALLL

•    Methodology

•    What can be done without purchasing a sensitivity mode?
•    Creating a reasonable scenario

WHO SHOULD ATTEND?
This informative session is best suited for credit analysts, commercial loan officers, residential mortgage underwriters, and credit risk managers.

MEET THE PRESENTER
S. Wayne Linder,
Young & Associates, Inc.