Alternative Economic Scenarios
Climate scenarios and stress testing
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.
Our services include
- 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
Learn more
Regulatory stress testing: CCAR, DFAST, PRA and EBA
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.
Our services include:
- 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
Stress testing and strategic planning
Access data, models, and award-winning experts to design, develop, and increase the effectiveness of your stress testing and internal liquidity and capital planning processes such as ICAAP and ILAAP.
Our consultants work with financial institutions to design, develop, and increase the effectiveness of their stress testing and strategic planning frameworks. We assist institutions to define and implement strategies that are best suited to their stress testing and planning objectives. We assess business requirements for the development, customization, and implementation of macroeconomic scenarios and/or models. We also provide access to macroeconomic models used by our own economists, empowering clients to incorporate their views and assumptions to design their own scenarios for stress testing and strategic planning. We provide support and advice on model configuration and user training.
Learn more about our integrated modeling framework
Scenario stress testing for front & middle office
Simplify the ever-growing complexity of regulatory stress tests with our Financial Risk Analytics division’s Scenario Stress Testing solution. Our flexible cloud-based scenario engine can expand regulatory prescribed shocks to the risk factors in your portfolio. Determine the P&L and capital impact on your trading book by feeding the shocks into our companion products: Traded Market Risk, Counterparty Credit Risk, and XVA.
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