Stress Testing

alt_moon Stress Testing

Stress Testing Analysis performed by ARCSys evaluates how your institution's loan portfolio would perform under adverse and severe economic conditions. To mimic these conditions, we utilize the actual changes in economic factors during the 2008 to 2010 credit crisis and the OCC annual stress forecast.

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Our Stress Testing Analysis Includes:

ARCSys will define a severe adverse economic scenario, typically based on historical data, economic forecasts, and regulatory guidance. This scenario should represent a significantly stressed economic environment. We’ll consider factors like GDP growth, unemployment rates, interest rates, and industry-specific risks.

ARCSys will utilize CECL segmentation for the stress testing, as well as other calculations and model inputs.

ARCSys will model the stress forecast to estimate expected credit losses under the severe adverse scenario for each portfolio segment. We’ll consider factors like default, loss, and prepayment rates and will incorporate the impact of the stressed economic conditions on these factors.

ARCSys will calculate the changes in forecast variables for each pool to determine if the changes are representative of the changes in the economic factors based on actual historical loss history.