Perform a stress test for your portfolios
zeb offers a comprehensive yet pragmatic stress test methodology and machinery, ranging from epidemiological forecasts to macroeconomic scenario definitions based on the dynamics of former crises to impact analysis—be it with respect to balance sheet composition, P&L, capital, funding, or liquidity. zeb provides methods and toolboxes that give your institution a kick-start towards economic stress testing capabilities. Using our simulation engine, we can establish ad hoc reporting built around immediately available and cloud-based reporting infrastructure.
It is absolutely vital to assess the potential impact on your credit portfolio in a “quick and dirty” fashion instead of waiting for more accurate data. As such, complex risk metrics should be avoided. Focus should be placed on a directional assessment of your sub-portfolios based on robust metrics, such as net exposure and credit loss under stress. A simulation with granularity down to the single name would be ideal. However, modelling major asset classes (10–30 depending on size and complexity of the loan book) should serve the purpose.
High—it is crucial to understand the current and potential future dynamics of the pandemic and to identify your institution’s main vulnerabilities from the overall portfolio down to the client level. Though eventually every counterparty is likely to be effected, it is vital to identify those requiring intensive care immediately.
Ultimately, the impact on your credit portfolio depends on both the provision of public support for selected industries and counterparties as well the application / modification of accounting/forbearance/capitalization rules. Furthermore a significant amount depends on how the pandemic develops.
Risk and financial control functions as well as portfolio management functions.