Alternative Economic Scenarios

Our proven model-based scenarios assist financial institutions and corporate customers with all aspects of design, development, and quantification of macroeconomic and macro-financial variables necessary to measure risks, meet regulatory requirements, and comply with accounting standards such as CECL and IFRS 9. We also provide proprietary climate scenarios and scenario expansion services to support regulatory climate stress tests with full model transparency and expert support.

We leverage our award-winning integrated modeling framework to understand the impacts of alternative scenarios across sectors and throughout global and regional economies. The scenarios equip our customers with the data, results, and understanding needed to complete their capital planning and stress testing processes. Whether you want to satisfy regulatory requirements or implement best risk management practices processes, our solutions can support you with the highest level of transparency and rigor.

Regulators around the world have begun to conduct climate stress tests or exploratory scenario analyses to assess the resilience of financial institutions to climate change and to transition towards net zero emission targets. Our economist and modeling teams support financial institutions undertaking regulatory climate stress tests or scenario analysis with modeling support and long-term projections of countless industry and country-specific variables. We construct and expand scenarios that are consistent with the assumptions provided by regulators such as the scenarios from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

We also support financial institutions’ internal climate stress tests and strategic planning with a set of proprietary climate scenarios. Our scenarios describe how different sets of stakeholders will shape policies and actions as we move towards a future with lower greenhouse gas (GHG) emissions including two net-zero cases. Each of the scenarios provides different implications for primary and final energy demand, global GHG emissions, and temperature pathways.

• Scenarios designed by our country and sector experts from across economics, energy, automotive, agriculture, and maritime divisions
• Carefully crafted narratives including comparative tables and charts
• Unique set of assumptions that include economic factors, the geopolitical environment, and focus on reducing GHGs through policies and carbon pricing, and consumer behavior
• Sector level detail and bottom-up simulations from integrated industry models as well as top-down assessments
• Data sets and detailed assessments of the scenario implications on the economy, on financial markets, and on asset prices, at a country by country as well as regional and global levels
• Transparent model development and validation documentation
• Customer support and direct access to the practitioners who construct and model the scenarios

Our scenarios help financial institutions stress test their balance sheets against supervisory scenarios to comply with Comprehensive Capital Analysis and Review (CCAR), Dodd-Frank Act (DFA), Prudential Regulation Authority (PRA) and European Banking Authority (EBA) requirements. We help institutions to assess their risk profile and vulnerabilities by providing essential inputs to their stress testing models to calculate capital and liquidity measures under regulatory assumptions. 

• Carefully crafted narratives for each of the scenarios, including comparative tables and charts
• Fast turnaround following the release of regulatory assumptions to meet submission deadlines
• Frequently updated scenarios and models
• Customer support
• Transparent model documentation
• Access to supporting data, models, and experts
• Up to 30 years horizon 

Financial institutions can use our suite of alternative scenario forecasts for the US national and regional geographies to develop impairment estimates required for Current Expected Credit Loss (CECL) compliance. We have taken care to consider where we are in the business cycle, volatility in the forecasts and other technical issues.

• US national and regional forecasts a base forecast, two optimistic and three pessimistic scenarios, updated quarterly
• Quarterly narratives that accompany the scenarios
• Probability weights of the  scenarios that use results from our proprietary factor model
• Access to our team of economists
• short-term (three-year) as well as long-term (30-years and beyond) forecasts

Our models, underlying narratives, and assumptions differentiate the scenarios as they are crafted by our US economics experts and built on our award-winning models. For clients with access to our models, we can provide solution files that allow you to refine the scenarios to suit your own narrative or create additional variations to assess a wider set of scenarios.

Since 2018, the International Accounting Standards Board requires institutions to use forward looking expected credit loss criteria to determine loan loss provisions. Our scenarios provide reasonable and supportable forecasts using award-winning models updated quarterly with associated probability-weights required to calculate loan loss provisions.

• Expansions a set of off-the-shelf or of client-chosen scenarios to provide global, US, and regional forecasts
• Quarterly scenario updates are available either as a refresh update to original or as a newly chosen scenario expansion
• Available for the US and Global scenarios

For clients who also have access to our models, we provide solution files that allow you to refine the scenarios to suit your own narrative or create additional variations to assess a wider set of scenarios.