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DRAFT
2
Table of Contents
1. Executive Summary
2. Evolution of Enterprise Stress Testing (ST)
3. An Integrated ST Framework Aligned to Enterprise Risk Appetite
5. Key Components of an Integrated Approach
9. Appendix
Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
7. Building Blocks of an Integrated ST Approach
4. Key Differences of Stressed Capital versus Economic Capital (EC)
6. Cross-functional Collaboration across C Suite
8. Conclusion
Executive Summary
3
While most financial institutions have invested heavily in enhancing risk models, processes, data, technology and human
capital associated with CCAR frameworks, integration of CCAR flows and results into enterprise risk appetite, capital and
performance management strategies is in nascent stages
Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
DRAFT
Many institutions are still in the early to mid stages of leveraging ST analysis and results for risk appetite alignment, capital
and performance management as evidenced by limited alignment of performance metrics, loosely integrated monitoring and
reporting frameworks
Shadow CCAR results/metrics are tracked but not integrated into risk appetite frameworks and capital management and
reporting
While there is an aspiration to link ST processes with internal business and performance management processes (pricing,
reserving, etc.) most institutions have made limited progress as the primary focus was on regulatory compliance. However, this
trend is likely to pick up significant momentum going forward as the industry focuses on efficiency gains and RoI considerations
Aligned decisions, common set of KPIs and integrated monitoring, analytics and reporting need to be the common
denominator for convergence of CEO/CFO/CRO Offices in shaping risk profile and financial performance of the institution as
expected by regulators
While linking EW risk appetite metrics to business strategies and risk limits can be as much art as science, we expect
banks to further ramp up use of ST results for managing risk appetite and capital/performance management going forward
Enhancement to
Models, Data,
Process and
Technology
Rush for
Compliance
Level of Enterprise
Integration
Compliance +
Risk Management
Integrated into
Business-As-Usual
Evolution of Stress Testing
“2009-2012”
Refinement of end-to-end
CCAR processes, models and
data flows
Limited use in risk
management activities such as
reserves, pricing but
disengaged from Economic
Capital and Risk Appetite
Elevated regulatory and
stakeholder expectation for
application in capital and
business planning
Supervisors shift focus to “Use
Test”, soundness of
processes, data,
documentation
Integrated risk and
capital
management
Reactive to comply with
CCAR requirements
Heavy investments in
infrastructure, data,
reporting and resources
Focused on capital
adequacy, with almost
no use for risk and
business decisions
Supervisors are focused
on meeting basic
requirements
1
2
3
Evolution of Enterprise Stress Testing – What lies ahead?
DRAFT
“2012-2015” “2016-2020”
ST scenarios and results are
integrated into key EW level
risk and performance
metrics
Integrated analytics and
reporting to embed ST
results into BAU applications
across all LoBs and
enterprise functions
Used as an anchor for
strategic planning and risk
appetite management
aligned with economic
capital processes
Supervisors take a more
holistic view of the CCAR
frameworks and leverage
integrated frameworks for
managing the risk and
trajectory of the system
Regulatory
Compliance driven
Low
Medium
High
“ Inception”
“ Current State”
“ Target State”
5
DRAFT
An Integrated Stress Testing framework should link the bank’s capital needs to its
strategic plan and risk appetite targets
Integration of LoB and EW scenario-driven
outcomes into risk strategies via measuring
impact on risk appetite metrics
Assess business-specific and firm-wide
resilience to regulatory and idiosyncratic stress
scenarios as well as extreme market and liquidity
events
Refinement/calibration of risk appetite targets
and tolerances based on key stress scenarios
Measure and monitor key risk indicators (e.g.,
limits, capital use) and performance through
integrated CCAR/Risk Appetite metrics,
analytics and monitoring capabilities
Fine-tune risk strategy, capital management and
performance decisions via dynamic impact
assessment of CCAR and Economic Capital
(EC) results
Optimization of risk-adjusted performance
within risk tolerances through
Forward-looking capital planning (regulatory
and economic capital)
Balance sheet optimization
Key Characteristics
Capital Management
Available
Capital
Regulatory
Capital
Economic
Capital Capital
Optimization
Enterprise Stress Scenarios
Performance Management
Strategy Investments Optimization Divesture/Exit
Regulatory Idiosyncratic Portfolio Market Liquidity
LOB Stress Test Scenarios
Regulatory Idiosyncratic Product Geography Operational
Bank Strategy Risk Strategy & Appetite
CCAR Framework
Board and Senior Management Oversight
Governance
Data & Technology
Integrated Stress Testing Framework
DRAFT
6
DRAFT
Despite earlier divergence, CCAR and Economic Capital can make a powerful
combination for integrated risk and capital management going forward
DRAFT
P
R
O
C
E
S
S
E
S
A
C
T
I
V
I
T
I
E
S
CCAR Reports filed
(Capital Plan,
FRY – 14 A/Q)
CCAR Model
Management
Risk Identification /
Scenario
Development
Projections /
Estimations (Model
Execution)
Capital Planning &
Adequacy
Regulatory
Reporting
Models
Implemented
and Validated
Stressed Risk
Factors
Capital
Decisions
Financial &
Capital Projections
over 9-Quarter
Horizon
Model Definition &
Implementation
Back Testing &
Validation
Model Approval and
Recertification
Model Inventory
Management
Scenario Definition
Scenario Library
Creation
FRB Scenarios
Projections (B/S,
PPNR)
Available Capital
Projection
Regulatory Capital
Projection
Assess Capital
Adequacy
Determine Capital
Actions
Develop Capital Plan
Report Submission
Report Certification
Risk Identification &
Material Risk Inventory
Projections (Losses)
Projections (RWA)
CCAR Lifecycle
CCAR Processes
CCAR framework requirements are focused around provision and consolidation
of end-to-end data, methodology and forecasting components from all
LOBs and relevant functional units across the enterprise
A minimum of 45 iterations of B/S, I/S and capital adequacy calculations (5
scenarios x 9 forecasted quarters) is needed
Risks identified and scenarios designed need to be pertinent to the size and
complexity of the institution with a typical inventory of 50-100 Risks
Requires comprehensive data management framework with accounting-
quality transaction data and understanding of data anomalies
CCAR Only Activities EC Overlapping Activities
Economic Capital Processes
Under the CCAR framework, Portfolio, LoB and Enterprise level
balances/CFs are forecasted based on the business/risk strategy of the
institution under stress conditions whereas EC excludes such forecasts
Economic capital takes place under a more Centralized operating model as
the methodology and forecasting requirements do not require the active
involvement of different constituents across the enterprise
In contrast, Economic capital results do not provide insights into the
consequences of specific stress scenarios/events
A hybrid of Point-in-time and Through-the-cycle risk parameters is used to
compute economic capital, which is calculated over one-year, invariably
causing dilution in results
Ke
y D
iffe
re
nc
es
7
DRAFT
CCAR Stress Tests and Scenario Analysis at the LOB and Enterprise levels can
complement EC results for a more holistic view on capital and risk appetite impact
Stress Scenario 1 in 5
years
1 in 20
years
1 in 100
years
Severely Adverse Scenario
(Downside risk in defined
variables resulting in high
aggregate PPNR losses and
erosion of equity)
N/A
20 to
50% of
common
equity
60 to
100% of
common
equity
Large Counterparty Defaults
(as evidenced by number of
defaults)
2 to 5%
of
common
equity
10 to
20% of
common
equity
> 50% of
common
equity
Commodity Market Crisis (as
evidenced by decline in oil
prices)
20% of
common
equity
20 to
40% of
equity
> 50% of
common
equity
CRE Market Downturn (as
evidenced by decline in market
prices)
10% of
common
equity
30% of
common
equity
60% to
100% of
common
equity
Re
gu
lato
ry
Sc
en
ario
Id
io
syn
cratic
Sc
en
ario
s
Scenario/Loss Analysis (Illustrative)
Expected Loss
Projected Loss Distribution under Economic Capital
(Illustrative)
Dividend Cut
Recapitalization
Capital Erosion/Insolvency
Loss distribution sets the “Economic Capital” requirements against probabilities of loss events
Stress tests define specific risk drivers and appropriate stress scenarios that have similar likelihood of occurrence to
facilitate aggregation of risks and losses at the enterprise level
The Board can decide the level of risks and tolerances the firm is willing to accept under stressed conditions
Probability
e.g., 1 in 20 years
probability of
occurrence
DRAFT
0
2
4
6
8
10
12
14
16
Book ca
pita
l
Provision
s
Provision
s
Provision
s
Rev
alua
tions
Rev
alua
tions
Rea
l estate
risk
Risk in
Parti
cipa
tions
ALM ri
sk
Trading
risk
Cre
dit r
isk
Ope
ratio
nal r
isk
Busin
ess
risk EL
Exces
s ca
pita
l
Banks need to ensure Available Capital is sufficient to withstand extreme loss events (e.g.,
1 in 1000 year events) leaving a Strategic Buffer based on the Risk Appetite as set by the
Board
Bottom-up calculation of EC supplemented with CCAR stress scenario assessments can
help inform the Risk Appetite targets and tolerances more effectively than stand-alone
approaches
Risk appetite targets and tolerances can be linked to capital as a ratio of Strategic Buffer to
EC or Strategic Buffer to Risk Weighted Assets under stressed conditions
Economic Capital allocation coupled with Stress Testing enable more realistic
risk appetite allocation while shedding light on potential capital shortfalls
Economic Capital View (Illustrative)
DRAFT
Stress Tests (Illustrative)
0
500
1000
1500
2000
2500
3000
3500
To Year 1 Year 2 Year 3
Adverse Scenario
Stressed Risk Capital Tier 1 Capital Available Capital
500
1000
1500
2000
2500
3000
3500
To Year 1 Year 2 Year 3
Severely Adverse Scenario
Stressed Risk Capital Tier 1 Capital Available Capital
Available
Capital
Economic
Capital
Strategic
Buffer
* Stressed Risk Capital is an Illustrative stressed estimate of EC over a 3 year
forecasting period
Leading institutions are increasingly focusing on integrated frameworks for
linking risk appetite allocation and capital management more dynamically…
Solvency risk appetite (defines capital requirements)
Regulatory capital
Economic capital
CCAR Stressed Capital
Available capital level and composition becomes the
defining factor (e.g., Tier 1 Capital/EC, Tier 1 Capital/RWA,
CET1 Capital/RWA, Leverage ratio under stress scenarios)
Concentration risk appetite
Exposures to sectors, counterparties, geographies
Profits in particular sectors, regions
Volatility risk appetite
Earnings
Economic profit/RAROC/RoE
Dividends
Provisions
Qualitative statements on non-financial risks will indicate
tolerance levels (e.g., policy breaches, # of risk incidents)
Risk Appetite defines at the top of the enterprise how much
risk an institution is willing to take while balancing the
interests of various stakeholders:
Creditors and regulators who are concerned with extreme
downside events
Shareholders who are concerned with events like
earnings/share price volatility
Reconciling between top-down risk appetite targets and bottom-
up limits have historically been a key challenge
However, more institutions are enhancing their data integration
and analytics capabilities to monitor and manage the impact of
granular limits (BU/portfolio level) on enterprise level risk
appetite
The integrated nature of CCAR/Stress testing processes
and data flows is likely to ease such reconciliation going
forward
DRAFT
Risk Appetite Considerations Typical Risk Appetite Measures/Capital Metrics
. 10 Confidential. Copyright © 2015 Accenture All rights reserved.
…Key components of an “Integrated Framework” include continuous
alignment and re-balancing of balance sheet, risk and capital decisions
Strategic Planning/Risk Appetite
Growth strategies and corporate risk
appetite that will impact the availability and
deployment of capital
Business plans linked to capital strategies
including capital allocation, risk adjusted
performance and incentives
Dynamic monitoring and re-calibration
of risk appetite targets and thresholds
Balance Sheet Management
Optimization of capital structure (equity and
debt instruments)
Determining “Strategic Buffer” capital levels
accounting for cyclicality
Liquidity stress testing and contingency
plans
Capital Management
Optimizing sources vs. uses of funds and
capital targets formulation
Refinement of capital distribution plans
(dividends, repurchases)
Capital contingency plans, KRIs and
triggers
Risk Management
Identification and assessment of all material
risks
Risk Management policies and procedures
linked to capital adequacy levels (e.g.,
limits)
Stress scenarios that will impact capital
access and funding requirements
DRAFT
11 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
This “Integrated Framework” will require extensive cross-functional collaboration
across the C-suite centered around common KPIs
Capital
Management
(CFO Office)
Strategy (CEO Office)
Risk
Management
(CRO Office)
Aligned decision processes and shared KPIs
Integrated metrics, analytics and reporting
framework Risk appetite allocation granularity and dynamic
re-calibration capabilities
Organizational alignment
Strategic Planning
Market/Customer/Product/Channel Strategies
Risk Appetite & Risk Strategy
Investment Plan
Business Execution
DRAFT
Capital raising
Capital forecasts
Performance
measurement
Capital
optimization
“Capital Plan”
Holistic risk identification
Risk measurements
Model risk management
Key Enablers
Limit setting/monitoring
Economic Capital
Provisioning
CCAR & EC
reconciliation Contingency
planning
Capital adequacy
Convergence across the three Offices
spurred by an unprecented regulatory
and market urgency to align strategy,
capital and risk objectives
CRO Office has become the “Trusted
Business Partner” with a much higher
visibility in shaping the strategic
direction and risk appetite of the
institution
Historically, each C-level Office had a
different stance on optimal trade-
offs among strategy, capital and risk
Common set of KPIs that facilitate
unified objectives is key and should be
based on risk appetite measures
Portfolio analytics
Building Blocks of an Integrated Stress Testing Approach
12
Specific milestones and capabilities need to be established to successfully embed CCAR scenarios and results into the
risk appetite framework and capital management processes
Establish clear Board commitment and responsibility for reviewing and approving risk appetite metrics and tolerances stemming
from ST scenarios and results. Assign SME resources/know-how where required
Assess current Risk Appetite framework to ensure complete set of KPIs and tolerances for all material risk categories exist at the
EW and LoB level, refine as necessary
Ascertain that key data/MIS required for defined KPIs (risk appetite metrics) is automated and accessible as needed
Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
DRAFT
Foundation Setting &
Design
Develop an inventory of all key ST scenarios (regulatory and idiosyncratic) that will be linked to key risk appetite metrics and
tolerances
Develop measurement capabilities to quantify the impact of all ST stress scenarios/events on key risk appetite metrics
Scenario Integration
Review measured impact of ST scenarios/results and EC results on key risk appetite metrics and enterprise risk profile. Evaluate
whether it lies within tolerances
Identify and monitor any risk areas where potential deviation might occur from tolerances and desired risk profile. Recalibrate top-
down tolerance to align with bottom-up risk profile (if required)
Measurement &
Calibration
Develop integrated monitoring and reporting capabilities showing impact on risk limits, capital, liquidity and risk-adjusted
performance
Identify and track early warning indicators tied to specific remediation plans
Develop aggregate and LoB-specific dashboarding with specific drill-down capabilities
Review & Monitoring
Capital Management
Refine active balance sheet and capital management competencies from human capital to processes, methodologies and tools
Link data integration, analytics and portfolio management processes to the capital management function and operationalize dynamic
capital actions
Conclusion
13
While the financial services industry’s heavy focus on CCAR framework requirements in the post-crisis era seems to overshadow the
economic capital management practices and past achievements, institutions can benefit from the increased convergence in these two
areas
Scenario-driven forecasts of CCAR stressed capital can complement the scenario-agnostic EC estimates in shaping the true risk
appetite of the institution in the eyes of the regulators, creditors and shareholders
Reconciliation between EC allocations, CCAR results and Risk Appetite targets can be the catalyst in an integrated risk and capital
management framework going forward
From an organizational perspective, EC teams with Risk can serve as the final consolidation point in the CCAR lifecycle providing
review and oversight of CCAR results while highlighting and bridging the differences with EC allocation and results
CEO/CFO/CRO Offices should make a concentrated effort to institute integrated frameworks accounting for the strengths and limitations
of stand-alone capital planning approaches and leverage the cumulative benefit of the heavy CCAR investments made over the years
Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
DRAFT
Appendix
DRAFT
14 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
15
DRAFT
Despite earlier divergence, CCAR and Economic Capital can make a powerful
combination for integrated risk and capital management going forward
Economic Capital CCAR Stressed Capital Key Differences
Description Total capital required to safeguard the enterprise against
economic insolvency based on economic risks
undertaken over the specified time period
Total capital required to safeguard the enterprise against
regulatory insolvency under a set of stress scenarios over
the specified forecasting period
Economic capital is designed to reflect real economic risks facing the firm in terms of unexpected movements in the value of assets and liabilities and on the confidence level selected by management
CCAR stressed capital forecasts are based on defined stress conditions designed
to result in a more comprehensive assessment of capital under such conditions,
which trigger regulatory action when thresholds are breached
Under the CCAR framework, Portfolio, LoB and Enterprise level balances/CFs are
forecasted based on the risk strategy of the institution under stress conditions
whereas EC excludes such forecasts
Operating
Model
Oversight, modelling and management of economic
capital allocation is typically centralized at the
Enterprise level within Risk or EW level Risk Analytics
LOBs, Risk, Finance, Treasury serve as input providers
for parameterization and modelling purposes
Oversight and modelling of CCAR Stressed Capital
displays a more hybrid operating model with individual
LOBs developing models but aggregated results are
managed and communicated jointly by CFO and CRO
Offices
LOBs, Risk, Finance and Treasury have responsibilities
around modelling and forecasting of specific CCAR
components (e.g., balances, expenses, losses)
Economic capital attribution takes place under a more Centralized operating model as
the methodology and forecasting requirements do not require the active involvement
of different constituents across the enterprise
In contrast, CCAR framework requirements are focused around provision and
consolidation of end-to-end data, methodology and forecasting components from all
LOBs and relevant functional units across the enterprise
While institutions target more centralization of CCAR frameworks, most institutions
are in the early to mid stages of that process
Risks and
Methodology
Economic capital results reveal the economic risks of the
institution
Typically encompasses credit, market and operational
risk categories with sub-risks included in respective
categories (e.g., CP risk in credit risk, ALM risk in market
risk)
Mostly top-down capital allocation based on BU/portfolio-
level estimates (e.g., PD, LGD and EAD and portfolio-
level default correlations in the case od credit risk; factor
sensitivities and correlations in the case of market risk; or
parameters of frequency/severity distributions and
dependency structure in the case of operational risk
More granular allocations require simulation-based
approaches with borrower, factor or loss type -level
correlations mainly applied to selective
portfolios/transactions (e.g., Large corporates in credit,
equities in market)
Calculated over a one-year time period
Capital impact of specific stress scenarios/events is modeled by stressing the balance sheet volumes and key risk parameters
Most CCAR banks developed/refined specific modeling
approaches to forecast CCAR capital or adapted existing
approaches (e.g., conditioned am IRB credit risk
parameter model on macroeconomic variables)
Forecasting of risk-weights under the Basel III Regulatory
Framework though there are differences in RWA
calculation methods across institutions
Portfolio/LOB balances, revenues, losses and RWAs are
modeled via numerous PPNR and risk models across the
forecasting horizon by LOBs and aggregated across the
enterprise
Capital adequacy based on regulatory minimum
thresholds for CET1, Tier 1 and Total Regulatory Capital
levels relative to RWAs
Calculated over a nine-quarter forecasting time period
Economic Capital: Economic capital results do not provide insights into the consequences of specific
stress scenarios/events “Tail” risks are still difficult to model due to limited data around extreme stress
events; however, additional data accumulated during the recent crisis can shed some
light in ongoing modelling efforts
Requires use of a capital multiplier based on selected confidence level for
calculation
Most institutions use a hybrid of Point-in-time and Through-the-cycle risk
parameters to compute economic capital, which is calculated over one-year,
invariably causing dilution in results
CCAR Stressed Capital:
CCAR methodologies require a longer horizon with nine-quarter forecasting of cash
flows and risk drivers
The CCAR capital framework is designed to estimate financial and capital impact
(revenues, losses, RWAs) of specific regulatory and idiosyncratic scenarios with
respect to each financial institution
Enterprise
Applications
Regulatory communication of risk profile Capital planning/management
Transaction structuring, pricing and limit setting
Portfolio optimization and risk-adjusted performance
decisions
Regulatory compliance
Scenario analysis
Reserving
Economic capital planning and use for risk management is more established across
the industry. Allocation granularity and risk and capital management applications
vary significantly across institutions
CCAR capital planning mainly focuses on meeting regulatory requirements with
limited use in other enterprise areas
Elevated expectations for CCAR integration into BAU decisions create new
opportunities for reconciliation with Economic Capital processes
Ove
rvie
w o
f C
CA
R S
tre
sse
d C
ap
ita
l
vs. E
co
no
mic
C
ap
ita
l
DRAFT
High-level Implementation Plan
16 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
DRAFT
Pilot Design Embed in EW Review & Refine
Define integrated framework,
key metrics and tolerances for
ST scenarios/events
Assess current EC and RAF
for any gaps in methodology,
process, data and reporting
and identify remediation plan
Establish roles and
responsibilities for review and
sign-off on key metrics and
tolerances, as well as
escalation procedures
Select a particular
portfolio/LoB for pilot
implementation prior to EW
roll out
Identify specific stress
scenarios and risk appetite
metrics within the context of
selected portfolio/LoB
Select and execute a series
of scenarios (historical,
regulatory, idiosyncratic) to
estimate portfolio impact and
impact on key BU metrics
(risk, capital, RAROC, etc.)
Aggregate portfolio/impact to
top-down enterprise risk
appetite metrics and identify
range in tolerances
Analyze results and identify
areas of improvement with key
stakeholders
Refine and prepare for EW
level launch
Assess firm-wide
organization, processes,
measurement, monitoring
and reporting capabilities
Refine governance model
and escalation criteria
based on key ST scenarios
Embed risk appetite and
tolerances tied to key ST
scenarios in EW level risk
appetite statements and
policies
Cascade EW level risk
appetite metrics into
LoB/portfolio limits and
controls
Upgrade reporting capabilities
with integrated ST/RA metrics
with traffic light risk triggers
and action tracking
Institute BAU process and
operationalize
Dynamic review of existing risk
profile versus target profile
Periodic Board and SM review
and sign-off of key ST events
on enterprise risk profile
Recalibrate if required
Credential: Integrated Planning & CCAR for Large US Bank
DRAFT
17 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
The Credit Card Services business unit reached out to Accenture to assess their
planning capability against best practices and industry peers. Card leadership
hypothesized that the current 7+ week forecasting cycle was excessive, and
requested assistance to identify areas for improvement. Bank recently had also
received MRAs related to CCAR submission to address excessive management
judgment in forecast models, weakness in data integration and a lack of governance
and controls in future submissions. Bank was looking for assistance to create a
single solution for both financial planning and CCAR regulatory reporting.
Accenture worked with Bank to conduct an assessment of the planning process and
methodology used at Credit Card Services. Through this engagement, the team
designed an integrated planning and forecasting framework, a data architecture
design and developed a roadmap to improve the planning capability through a
series of initiatives.
• Evaluated current planning capability against peers and leading practices
• Recommended a target state vision that addresses the current challenges in the
planning process by creating an integrated performance management framework
and capability rigorously focused on the drivers of shareholder value and
regulatory compliance
• Designed operating model that integrates CCAR into standard business and
financial planning cycle
• Reduced 7+ week forecasting process to <1 week through elimination of sequential steps, and enhanced automation of baseline and scenarios
• Addressed all current MRAs in latest CCAR submission
• Standardized and integrated a repeatable forecasting process that includes audit check-points and strong governance
• Enhanced statistical models to rely on Fed supplied macro-factors rather than excessive management judgment
• Increased transparency of forecast with ability to drill back to drivers and perform root cause analysis
Business Challenge Approach
High Performance Delivered
The large US Bank is a financial holding company, and provides various financial services worldwide. Its Retail Financial Services segment offers consumer and business, and
mortgage banking products and services that include checking and savings accounts, mortgages, home equity and business loans, and investments. The company’s Card
Services and Auto segment provides payment processing and merchant acquiring services.
Client Profile
Credential: CCAR Modeling Framework, Model Dev. and Implementation for
Regional Bank
DRAFT
18 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
Accenture provided services across the following areas:
Operating Model
• Reviewed existing retail CCAR loss forecasting models for multiple lines of business and conducted ‘As-is’ assessment of current process for compliance the US
regulations
Enterprise Risk and Stress Testing Framework
• Reviewed the existing vendor model documents and model validation MRA’s for as-is state assessment
• Developed a robust CCAR loss forecasting framework and worked with vendors to ensure the best in class model development practices are integrated
• Performed stress tests on Fed recommended scenarios for vendor supported applications
• Developed and Implemented model delivery lifecycle for retail CCAR loss forecasting models across multiple vendor applications
• For bank’s Auto lending portfolio, developed forecasting models for outstanding Balance and Deposit Service Charge. Also, supported model documentation for revenue
forecasting model for Cards portfolio
Risk Analytics and Execution Platform
• Review and automate the data processes to make the execution platform efficient and consistent
• Perform UAT for Moody’s Credit Cycle, Strategic analytics and Look ahead applications to ensure the accuracy of execution platform
Developed and implemented CCAR Loss Forecasting models utilizing vendor solutions – Moody’s Credit Cycle, Strategic Analytics and LPS • Led efforts to understand and document vendor models and Banks’ CCAR/stress testing methodologies
• Managed the Bank’s CCAR modeling program by leveraging a off-shore visa enabled delivery team
• Trained and provided oversight to internal modeling team
• Highlighted by SVP of Model Validation as reason bank will meet CCAR deadlines this year.
Business Challenge and Approach
High Performance Delivered
The bank was advised by the Fed to demonstrate understanding of vendor loss forecasting models for multiple retail portfolios, as part of its Fed CCAR submissions. The effort
required significant subject matter expertise to ensure completion of multiple vendor model development, validation and stress testing efforts based on industry best practices
and approaches.
Client Profile
Credential: CCAR Model Doc. and Reporting Framework for Global Bank
DRAFT
19 Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information
Accenture provided services across the following areas:
Operating Model
• Accenture team of 9 resources (6 US / 3 India) delivered on the documentation of bank’s CCAR models and successfully delivered on the comprehensive package of
resubmission narratives for six of bank’s lines of businesses under tight timescales.
Enterprise Risk and Stress Testing Framework
• Delivered documentation for more than 100 CCAR models that drive loss forecasting, PPNR revenue forecasting, acquisitions, and balances. Also, supported model
validation and governance effort
• Delivered comprehensive package of CCAR Narratives (covering PPNR, Loss, Balance Sheet, RWA) for Cards, Consumer Deposit, Business Banking, Cards, Mortgages,
Students Loan & Auto
• The team is currently delivering quality documentation for – (a) Cards division on loan loss reserving (b) Business Banking division on more than 50 CCAR models (c) AML
policies and technical specifications (d) Narratives for 2014 End Year CCAR submissions
Regulatory Reporting
• Developed an End-to-end industrialized reporting process, including CCAR reporting templates and mock-ups, to streamline the communication of loan loss reserves
results to various stakeholders (e.g., regulators, external auditors and senior management)
• Developed agility and precision to support the bank in meeting tough regulatory deadline for CCAR re-submission. The Card CFO called the Accenture team as the key
success driver for 2013.
• Accenture’s documentation was declared as the “Gold Standard” benchmark for all business units to emulate
• For outstanding contributions, personalized “Appreciation Letters” were awarded by bank’s Chairman and CEO
Business Challenge and Approach
High Performance Delivered
Bank’s cards division received a series of findings on its CCAR submission that required enhancements prior to its FY 13 submittal. The redeveloped CCAR models (Pre
Provision Net Revenue (PPNR), Loss, Acquisition, OS migration, CCAR Integration) needed to be documented and CCAR packages to be delivered to Fed under tight
timescale
Client Profile
Credential: Stress Testing and Risk Reporting Analytics Outsourcing for a
Global Investment Bank
DRAFT
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The client wanted to maintain and enhance the Credit Risk System functionality and flexibility, speeding up time to implement changing regulatory requirements specified
under Basel II and III accord.
Accenture provided Business Intelligence solutions using SAS, Oracle, Unix and Java to support the client’s Credit Risk reporting system. In doing so, Accenture were able
to
• Develop system changes based on Basel II and III regulatory requirements. (Change-The-Bank)
• Enable Financial Stress Testing by developing and maintaining a robust platform and performing the daily Operations. (STE)
• Perform Release-based Assembly Testing. (CI/INT Testing)
• Perform deployment, assist in release management and provide 3rd level production support . (Run-The-Bank)
Business Challenge and Approach
High Performance Delivered
A leading global investment bank operating in over 70 countries with presence in major emerging markets, including the Asia-Pacific, Central and Eastern Europe and Latin
America
Client Profile
Implemented Credit Risk System enhancements with high service quality • Developed a Stress Testing platform that evolved to be a corner stone of the client’s financial adverse scenario simulations. This has enabled bank to do 400+
adverse scenario simulations per year.
• Testing Team pioneered usage of the ALM Tool for Test Management and Defect tracking. Testing effectiveness at 100% ensuring zero defect leakage to UAT.
• Our Dev and 3rd Level Support to the client’s Basel III initiatives enables the bank to go live with Basel III as the leading system on schedule.
• 100% Manila ownership of Deployment in all INT, UAT and PROD environments ensuring timely credit risk reporting based on accurate release-based changes.
Credential: European FBO –
Dodd-Frank Section 165 Business and Technology Architecture Definition
DRAFT
21
Enhanced Prudential Standards (EPS), highlighted by Dodd–Frank Section 165
demands Foreign Banking Organizations to establish an Intermediate Holding
Company (IHC) by July 1, 2016. The regulations place varying demands for change
in banking processes, including improved capital planning, liquidity monitoring, and
risk management
• Being an IHC also demands alignment of process technology and data across
legal entities within the United States
• Our client was accountable for safe delivery of the technology and data
architecture for the IHC
• Limited availability of business SMEs given competing demands for input to the
CCAR process
• Continued business model and regulator commitment coordination with parent
resulted in contradictory imperatives
• Introduce subject matter experts to drive requirements gathering, with business
stakeholders at discovery workshops
• Develop end-to-end architecture for the bank’s response to the IHC
requirements, including:
o Functional architecture
o Application architecture
o Data architecture
o Data sourcing strategy (including interface, application, and infrastructure
inventories)
• Identify key transition states for the end-to-end architectures
• Define an implementation plan for day 1 IHC and through 2017, including
required investment and resource needs
• Mobilization of the governance to oversee implementation of the delivery plan
• Certainty around the technology and data architecture required for delivery of the IHC
• Integration with bank-wide planning for the IHC, including an understanding of key inter-dependencies
• Business awareness of the operational reality of being an IHC and the preparation required
• Ability to communicate the journey to becoming an IHC for key internal and external stakeholders
Business Challenge Approach
High Performance Delivered
Leading European financial services institution
Client Profile
Copyright © 2015 Accenture. All right reserved. Accenture Confidential Information