Stress Testing Solution
The Stress Testing application
compiles probable migration matrices based on the customer's financial
position or a simulated portfolio based on user-defined customer
characteristics.
The application has a
user-defined, objective probability of default rating function. The rating
attributes - solvency, liquidity, capacity, and credit score are weighted.
Each loan is objectively rated prior to an identified shock, and after the
application of the shock. The application calculates the weighted average
risk of the sub-portfolios prior to the shock, and after the shock.
The migration of risk is
summarized by industries. Portfolio shocks include: change in gross
business revenue, change in business expense, change in non-business
income, change in interest expense, change in long-term asset values, and
change in credit score.
Individual customers and loans
can be viewed and reported. A "watch list" can be created and distributed
to the assigned credit professional.