Fed Qualitative Feedback: Challenges Ahead

Like others in our industry, we are anticipating market news in the coming weeks regarding additional feedback from the Federal Reserve to the 31 Bank Holding Companies (BHC’s) that participated in the 2015 CCAR review.  Recall that in early March, the QUANTITATIVE Stress Test results were published, with most of the entities passing these capital aspects and ratios. 

The next step in the Fed process is the QUALITATIVE FEEDBACK. 

This feedback, which will likely be known as, and come in the form of “Feedback Letters," will in essence serve as homework assignments to the banks, and lay out deficiencies in the process for capital planning and management. 

This has come up in multiple meetings for me recently with senior executives where this is a very high priority.

Qualitative areas that are expected to be of concern include:  Capital Policies, Documentation, Accounting Calculations (of net revenue and loan loss reserves, etc.) Data and Model Risk Management, Loss Assumptions, Projection Methodologies, Operational Risk Documentation and Loss Estimation methodologies, just to name a few.

Part of RiskSpan’s unique services offering in the stress testing CCAR/DFAST space is that we combine:

·       Accounting Expertise

·       Data Management and Model Risk Management Expertise

·       Production Modeling and Model Validation Expertise

·       Process and Controls Expertise

We know that our clients will be faced with challenges coming out of this Fed feedback cycle, some of which will need to be assisted/supported by industry advisors like RiskSpan. 

If you would like assistance, advice, or simply want to bounce ideas off of us, or hear about what we are observing industry-wide, please reach out to us.  We are more than happy to set up a meeting by telephone or sit down in person for a session to discuss challenges.

Contact Us:

Bill Vahey

Senior Managing Director