Stress Testing and Strategic Analysis for Banks of All Sizes

Stress testing is coming for banks of all sizes.

  • Dodd-Frank / CCAR / CapPR processes are a regulatory requirement for banks of more than $10 billion in assets
  • Smaller banks should get ahead of the curve: stress testing your loan portfolio is a prudent process for any bank, for internal management strategy, for investor relations, and for regulator comfort.

Although the Fed has mandated stress testing so far only for banks of over $10 billion in assets, it is likely that some form of stress testing will be imposed upon smaller banks in the very near future - note the official word that "all banking organizations should have the capacity to understand their risks and the potential impact of stressful events and circumstances on their financial condition"1. In any case, stress testing your loan book is prudent, is sensible, reassures investors and - in some cases - will be an eye-opening experience!

Why should you start stress testing now?

  • You are far better off being proactive with your regulator instead of reactive in terms of tying capital adequacy to your growth plan. Instead of waiting for your regulator to possibly push back against your growth plan, or, even worse, tighten your capital requirements as they are doing to many banks, it is in your best interest to pre-empt all of that by presenting them with forward-looking analysis that demonstrates you are properly capitalized - now and taking into account your business strategy or growth plans.
  • You should be able to take comfort that your capital is sufficient to weather adverse economic conditions, should they occur. You may not have to raise capital, but in a severe economic scenario you may have restricted capital that you cannot 'put to work.'
  • A stress test is also a great way for you to 'tell your story,' whether that is to regulators, investors, acquisition targets or others. Stress testing provides a strategic method to further solidify the safety and soundness of your portfolio. Don't wait to be on the defensive -- throw the first punch!

Banks and regulators praise the Invictus methodology and products as a best practices tool for stress testing, risk mitigation, and as a foundation for strategic and capital planning. Our customers range from banks with assets of less than $100 million to well over $10 billion.

Find out more:

Invictus Customised Bank Stress Analysis (for banks <$10 bil in assets)

Large Bank Stress Testing and Strategic Planning (for banks >$10 bil in assets)

Financial Advisory Services


1 From "Supervisory Guidance on Stress Testing for Banking Organisations with More Than $10 Billion In Total Consolidated Assets", 10 May 2012, by the Department of the Treasury, Federal Reserve System and Federal Deposit Insurance Corporation. Docket No. OCC-2012-0004 and OP - 1421.