RMA Announces Findings Stress Testing and Scenario Analysis Survey
The Risk Management Association (RMA) has released results from a survey on stress testing and scenario analysis practices in community banks. The study, conducted in August 2008, was developed in conjunction with RMA’s Community Bank Council, which is composed of senior-level industry practitioners from RMA member institutions. Key findings included the fact that stress testing is conducted in 42% of the surveyed institutions, with the commercial loan and non-owner-occupied commercial real estate portfolios receiving most resources. Results of the stress tests are shared with the board of directors in 66% of the institutions that stress test. The results of the stress tests are most widely incorporated into individual and portfolio lending decisions, concentrations and limits setting, and the allowance for loan and lease losses. The results are not being utilised fully in strategic planning or capital planning. Current barriers for utilising stress testing more fully include lack of perceived expertise within the institution as well as lack of systems to enable stress testing.