Turn Your Required Portfolio Stress Test into an Empowering Experience
How many times have you heard the saying "the best defense is a good offense?" That saying couldn't be more true when it comes to providing comfort regarding the composition and risk embedded within bank portfolios.
Too often loan portfolios are judged based on the credit culture and practices of others, when they should be based on the specific attributes and characteristics of the customers that combined make up your portfolio. Many times, better than average historical performance is not enough.
A portfolio is simply the consolidation of customers, and these customers are a product of their complex layers of credit attributes. These customer characteristics are usually referred to as layers of RISK. Within this classification, the term risk is intended to include weight for good or positive attributes equally with negative attributes.
The Power of Layering Risk
The layering of these risks at the customer level allows you to:
- Support the strength of your portfolio
- Isolate, track and create appropriate strategies for high risk segments
- Increase profitable customer retention while having the tools to effectively provide comfort to regulators and other stakeholders that bank management understands the inherent risk and is doing the right things to manage it
Stress Testing produces diverse outcomes based on the nature and combination of these layers of risk. Stressing a portfolio amplifies negative performance characteristics while barely affecting loans that exhibit primarily positive ones.
Whether your bank has a portfolio of low-risk customers or isolated pockets of adversely high-risk, when you are able to prove that risk has been accurately identified and your strategies and practices appropriately address the inherent risk, you feel empowered and can confidently go on the offense.
For a free consultation, contact Gateway Asset Management. We help community banks manage risk, satisfy regulators, and build the analytical foundation needed to go on the offense.
What you'll learn in the video:
- Focus on Turning Stress into Empowerment
- Why is it important to evaluate your Bank's readiness now?
- Where should we focus our attention and priorities to get ready?
- Common challenges and solutions
- How CECL provides a logical "Baseline" for Stress Testing
- How to ensure the Bank's unique credit culture is accurately reflected in a life-of-loan reserve?
- How can a Community Bank afford to implement the same practices as larger Banks?
- How can I leverage an investment in a strong Risk Management foundation to benefit related processes within our Bank?
Watch the webinar video:
Gateway Asset Management provides custom financial advisory solutions to FDIC insured institutions, investors, law firms, and regulatory agencies across all 50 states.
- Category
- Portfolio Stress Testing
- Author
- Gateway Asset Management
- Published
- Read Time
- 4 min read
Gateway Asset Management provides custom advisory solutions to FDIC insured institutions. Let's discuss your institution's needs.
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