Bank Stress Testing

London Financial Studies
Training overview
Professional Course
2 days
From 3,930 USD
Start dates
New York City
3,930 USD
Contact LFS for details

Course description

Bank Stress-Testing - CCAR, DFAST, and ICAAP

This two-day program focuses on Bank Stress-Testing from a US bank perspective (including foreign banks active in the US). The capital stress-testing models presented can be used for Dodd-Frank Act required company-run stress tests under the same macroeconomic assumptions as used in the Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Supervisory Stress Test (DFAST).

These models can also be used for banks’ Internal Capital Adequacy and Assessment Process (ICAAP) and Supervisory Review and Evaluation Procedure (SREP).

Over a sequence of workshops, participants will build a complete capital stress test model for a tier 1 corporate bank, illustrating stressed loan loss methodologies across all major loan types within retail and wholesale.

Finally, the course also covers qualitative aspects of CCAR, including Federal Reserve’s expectations regarding risk management and internal controls.

Want to find out more?

Who should attend?

The Bank Stress-Testing course is beneficial to those involved in the financial sphere particularly professionals in the following areas:

  • Bank credit and equity analysts
  • Risk managers, counterparty risk, and CVA desks
  • Asset managers
  • Bond holders
  • Hedge fund managers
  • Bank treasury managers
  • Bank regulatory capital managers
  • Government Treasury staff
  • Regulators

Training content

Day One

Introduction to Bank Stress-Testing

  • What is stress-testing – capital vs liquidity stress-testing?
  • Motivation for stress-testing – internal vs external supervisory and external investor purposes; bottom-up vs top-down. Stress tests as a comprehensive and fully integrated, quantitative health assessment of banks as distinct from partial CAMEL-based approaches
  • Role of stress-testing in Comprehensive Capital Analysis and Review (CCAR); Dodd-Frank Act Supervisory Stress Test (DFAST); Internal Capital Adequacy and Assessment Process (ICAAP); and Supervisory Review and Evaluation Procedure (SREP), as well as in business planning
  • Building blocks of a bank stress test model – pre-provision operating profits; loan loss and other asset provisioning; balance sheet; regulatory capital; linking the income statement, balance sheet, and regulatory capital models


  • Components of Federal Reserve’s annual assessment of large Bank Holding Companies (BHCs) – Comprehensive Capital Analysis and Review (CCAR); Dodd-Frank Act Supervisory Stress Test (DFAST)
  • In-scope entities
  • CCAR components and use of DFAST results – capital adequacy; capital planning process; planned capital distributions
  • Mandatory elements of a capital plan
  • CCAR qualitative assessment focus areas – governance; risk management; internal controls; capital policies; scenario design; projection methodologies

Case Study 1: Supervisory expectations of banks’ risk management framework and controls

Case Study 2: Linking macroeconomic and bank-level variables

  • DFAST framework – baseline, adverse and severely adverse scenarios; minimum stressed capital ratio requirements; planning horizon

Case Study 3: DFAST 2016 scenarios

  • BHC data submission
    Scenario design framework for stress-testing – macroeconomic and financial market variables

Case Study 4: Scenario design 2012 – 2016

Workshop 1: Econometric techniques for stress-testing

  • Multivariate ordinary least squares regression
  • Markov processes
  • Vector autoregression

DFAST Fed Modeling Methodology

Retail Lending

  • Residential mortgages

Case Study 5: Probability of default (PD) model for first-lien residential mortgages

Case Study 6: Loss Given Default (LGD) model for first-lien residential mortgages

Case Study 7: PD model for HELOC residential mortgages

  • Credit cards

Case Study 8: PD model for credit cards

  • Auto

Case Study 9: PD model for auto loans

Case Study 10: LGD model for auto loans

  • Other retail lending

Case Study 11: Net charge off model for small business loans

Case Study 12: Net charge off model for other consumer loans

Workshop 2: Modeling stressed retail loan losses for Bank of America Corporation

Day Two

Wholesale Lending

  • Corporate

Case Study 13: PD change model for commercial and industrial loans

Case Study 14: LGD model for commercial and industrial (C&I) loans

  • Commercial Real Estate (CRE) mortgages

Case Study 15: PD hazard rate model for CRE loans

Case Study 16: LGD model for CRE loans

  • Loans Held For Sale or Measured Under Fair Value Option

Case Study 17: Discount yield model for corporate and CRE loans

Case Study 18: Duration and spread model for retail loans

Securities Available For Sale and Held To Maturity

  • Present value method
  • Full revaluation
  • Duration-based approach

Trading Book

  • Global market shock
  • Credit valuation adjustment (CVA) losses

Counterparty Default

  • Estimating impact of largest counterparty default

Case Study 19: Exposure, netting and collateral

Operational Risk

Case Study 20: Panel regression model

Case Study 21: Historical simulation model

Workshop 3: Modeling stressed corporate loan losses for Bank of America Corporation, both C&I and CRE

Pre-Provision Net Revenue

  • Modeling interest income and interest expense
  • Modeling non-interest income
  • Modeling non-interest expenses

Balance Sheet and Risk Weighted Assets

  • Fed’s industry-wide loan and non-loan asset growth model
  • Applying Fed model to individual BHC
  • Credit and market risk weighted asset projections

Regulatory Capital

  • Linking to income statement, balance sheet and RWAs
  • Transition arrangements

Workshop 4: Full capital stress test for Bank of America Corporation

  • This workshop brings together all strands of a capital stress test for Bank of America, drawing on the components built in Workshops 2 and 3
  • The stress test model can be used as a template for ICAAP/SREP purposes and for Dodd-Frank Act company-run stress tests performed under same macroeconomic assumptions as DFAST


The cost of Bank Stress-Testing - CCAR, DFAST, and ICAAP training course is available upon request.

Certification / Credits

London Financial Studies is registered with CFA and GARP Institute as an Approved Provider of continuing education programs. GARP & CFA Institute members attending this course are eligible for 16 CE/CPD credits.

About London Financial Studies

London Financial Studies

Global markets move quickly, evolving continuously and deepening in complexity. Over the past decades London Financial Studies has provided specialist executive education programs and short courses focused exclusively on global capital markets. Preparing only the highest quality and most relevant...

Read more and show all training delivered by this supplier

Contact this provider

Fill out your details to find out more about Bank Stress Testing.

  Contact the provider

  Get more information

  Register your interest

Country *

Contact info

London Financial Studies

 Show phone number

Request Information

Have a question about this course? Fill out this form and the provider will get in touch with you shortly

View again
Supplier Directory
Join our Supplier Directory to:
- Gain Traffic
- Get Noticed
- Showcase Your Services
- Free Listing Available