What is the Purpose of Loan Portfolio Stress Testing?
Bank Advisors has developed a model for Interest Rate Stress Testing that understands and reflects the reality of Community Banking and the realities of its portfolio. Loan Portfolio Stress Testing allows your financial institution to identify current and emerging risks and vulnerabilities within the loan portfolio by assessing multiple economic factors. The process ultimately educates your institution’s management, board, and regulators on the potential effects of loan losses on capital.
Our Approach
In addition to the representative scope of your loan portfolio, Bank Advisors takes a collaborative approach to loan portfolio stress testing by working with management to identify credit concentrations within your portfolio that may present greater risk to your institution. Our granular approach heavily weights loan-by-loan stressing with real-life scenarios, accounting for declines in collateral value and debt service coverage to determine the impact on capital ratios, ALLL, and profitability. This provides confidence to the Regulators and Boards of Directors that portfolio weakness and capital adequacy are accurately and fairly assessed.
Our Value Proposition
Loan Portfolio Stress Testing can be combined with our Loan Portfolio Review Services for a clear economic benefit when compared to the cost of accounting and audit firms. Contact us today to find out more about how we can serve you.