Forward economic guidance in CECL and impact on CCAR

Forward economic guidance in CECL and impact on CCAR

By Prasoon Saurabh, Head of Scenarios and PPNR Modelling, HSBC

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

Prasoon is a Senior Vice President and head of scenario design and PPNR modeling for HSBC USA. As the head of scenario design, Prasoon leads a team of economists and quantitative modelers to design and enrich macroeconomic scenarios for CCAR and CECL programs. Additionally, Prasoon heads the PPNR modeling group leading the development of balance sheet and revenue models used in CCAR.

In his ten years at HSBC, Prasoon worked in different roles, including credit card portfolio management and model risk management. Prior to HSBC, Prasoon worked in Capital One and Progressive Insurance. He has a Masters in Industrial Engineering from Arizona State and Bachelors in Mechanical Engineering from Indian Institute of Technology, Bombay.

What, for you, are the benefits of attending a Congress like the ‘Stress Testing USA Congress’?

Primarily, the benefits are (a) understand current range of industry practices in respective stress testing areas and benchmark yourself, and (b) network with colleagues in industry. Additionally, there are always new surprises shared, ideas or experiences, which can be helpful in our day to day jobs.

What challenges may arise from integrating with the broader process?

Integrating CECL process with stress testing may have limited challenges. First, the initial investment needed for CECL will compete with regular stress testing resource needs. Second, CECL scenarios have slightly different stakeholders (chief accounting officer) compared to CCAR. Similarly the governance process will be different. Third and the biggest challenge will be integrating CECL scenarios in CCAR allowance forecasting process.

How can software and technology impact these processes? How will this affect your work?

Automation will be key to implement CECL program. Unlike stress testing, CECL will be used for quarterly reporting. Hence, even bigger need for quality control.

How do you see the stress testing regulations evolving over the next 6-12 months?

I don’t expect massive changes; some reduction in requirements but nothing massive like CCAR going away. Maybe some easing.

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