Strees test models in Banking sector

1. Stress testing

2. Stress testing in banks
A stress test, in financial terminology, is an analysis or
simulation designed to determine the ability of a given
financial instrument or financial institution to deal with
an economic crisis.
Typically economy in the world is very stressful. That's
why the stress test is very important in bank's capital
management today.

3. Economic scenario generator
A series of models
Financial statement module
How the platform works got 3
components

4. Bank B
A $3,000,000
B $4,000,000
C $2,500,000
D $3,600,000
E $2,000,000
Total: $15,100,000
Interest rate: 10% >>> $16,610,0
Interest rate: 20% >>> $18,120,0
Equity: $50,000,000
Liabilities: $24,600,000

5. Bank X
Countries Credit portfolio
Pakistan 3,200,000$
Turkey 1,850,000$
Latvia 700,023$
Austria 2,357,641$
Brazil 4,839,546$
Montenegro 581,947$
Others 123,456$
Total Portfolio 13,652,613$
Assets
Loans to customers 13,652,613$
Investments 10,000,000$
Equipment 15,000,000$
Building 20,000,000$
Intangible 2,525,701$
Total Assets 61,178,314$
Equity and Liabilities
Equity 50,000,000$
Liabilities
Deposits from customers 11,178,314$
Total Equity and Liability 61,178,314$

6. Oil price shock
 $100 per barrel
 $110 per barrel
 $150 per barrel

7. Monte Carlo Simulation
Used to model the probability of different
outcomes in a process that cannot easily be
predicted due to the intervention of random
variables

8. Bank X
CEO resignation (because of internal problems)
Stock price: $50 >>> $20
Solution:
 Hire new CEO
 Raise the salary of previous CEO