![]() ![]() While BHCs are making an effort to bridge their cross-product and functional gaps, the deficiencies will continue to pose challenges because of how banks may be organized as well as a specific bank’s approach and scope to multidisciplinary data infrastructure. Key Risk Definitions: Identifying key risk factors and establishing proper correlations to macroeconomic scenarios requires intimate knowledge of lines of business as well as timely organizational transparency. Some of the more common challenges faced by BHCs are outlined below. The improvements are targeted to address matters requiring attention (MRAs) and matters requiring immediate attention (MRIAs). Even the BHCs that have gone through a few CCAR cycles find that they are required to enhance their CCAR processes every year. Independent model validation has both qualitative and quantitative aspects.ĭevelopment of reliable econometric models continues to pose challenges for BHCs. CCAR requires an independent model validation approach focusing on methodology, parameterization, key assumptions, data and scenarios, implementation, governance, processes and documentation. Comprehensive Capital Analysis and Review process (CCAR) requires bank holding companies (BHCs) to develop well-documented and formally tested econometric models relating their pre-provision net revenue (PPNR), loss provisions, market, credit and operational losses to baseline and macroeconomic stress scenarios.
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