The Workflow Process in the SAS Stress Testing Solution
- Regulatory stress tests – stress tests that are required by regulatory agencies. These include the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) regulatory framework, the European Banking Authority’s (EBA) regulatory framework for Enterprise-Wide Stress Testing (EWST), and the Basel II Internal Capital Adequacy Assessment Process (ICAAP) regulatory framework.
- Business-as-usual stress tests - business-as-usual stress tests are internal stress tests that can be used to plan for and quantify risks resulting from strategic changes to an institution’s portfolio over time.
Both of these types of stress tests require institutions to calculate potential credit losses and create loss reserves.
The purpose of this post is to discuss what the SAS Stress Testing solution offers and to discuss two of the many tasks that users can perform in the solution.
What is a cycle in the SAS Stress Testing solution?
In SAS Stress Testing, a cycle represents the stress testing activities that are conducted for a given time period under a specific set of risk scenarios. The workflow, ST_Cycle, which is provided as a sample in the SAS Stress Testing solution consists of the following tasks:
- Data processing
- Business projection analysis
- Portfolio projection analysis
- Credit risk analysis
- Attribution analysis
- Sign-off
The ST_Cycle workflow:
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Credit Risk Analysis and preceding tasks in the SAS Stress Testing workflow
SAS Stress Testing enables you to conduct regular stress tests on an organization’s assets and liabilities. These stress tests can be for the purposes of internal auditing, external auditing, or to meet regulatory reporting requirements. Before reaching the credit risk analysis task in the workflow, users must complete the following preceding tasks (each task includes its own set of subtasks):
- Data processing
Analysis data is prepared for use in the credit risk analysis. A user can run data quality checks on the analysis data and review the data quality results in the Data Quality Report. - Business projection analysis
A user creates the Breakeven Point (BEP) and then updates an existing BEP with new projections. A user then reviews the BEP results in a report. - Portfolio projection analysis
A user generates front books for different portfolio and allocation model combinations. - Credit risk analysis
This task contains two sub-tasks: Run Attribution Analysis and Review Attribution Analysis Results. During the Run Attribution Analysis sub-task, a user runs attribution analysis to see what factors contributed to period-over-period changes in expected credit loss.
Then, during the Review Attribution Analysis Results sub-task, a user reviews the attribution analysis results in the Management Report. The user can either go to the next workflow task to sign off on the results or go back to the Run Attribution Analysis sub-task to run the attribution analysis again. In any of the previous tasks, a user can also revert back to the task if not satisfied with the results.
SAS Stress Testing includes the following credit risk stress testing scenarios:
Common scenarios:
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- ST ScenarioSet 2018.12
- ST ScenarioSet 2019.01
Divergent scenarios:
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- ST Basecase ScenSet 2018.12
- ST Adverse ScenSet 2018.12
- ST Basecase ScenSet 2019.01
- ST Adverse ScenSet 2019.01
To Learn More
To learn more about how you can utilize the SAS Stress Testing solution for your institution, there is an upcoming SAS Stress Testing course that will explain all the solution’s features. In the meantime, see SAS Help Center: Welcome to SAS Stress Testing. Please note that you must contact SAS for an access key to be able to review this user’s guide.
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