Overview of the process for new filers and existing ones: Controls and best practices

Overview of the process for new filers and existing ones: Controls and best practices

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Gary, can you tell the Risk Insights’ readers about yourself and your professional experiences?

I started my career with Deloitte and through them participated in the restatement effort of Fannie Mae. That gave me the securitization knowledge that opened the door into the banking world and has carried me through to today. I’ve worked in DC, London, Saudi Arabia, Charlotte, and now Philadelphia, in various roles, but always in regards to structured transactions. Post crisis my career has largely been one of emerging regulation, from the Basel Market Risk Amendment to CCAR and DFAST, my background in complex financial structures has helped me distill the regulations into implementable practice.

At the Stress Testing USA Congress, you delivered a presentation on CCAR complexities. Why do you believe it is important to review the process for new filers and existing ones?

On the down side there are the pitfalls that others have already experienced, learning from other’s mistakes allows your organization to avoid costly errors and false starts. On the up-side taking best practices from long established firms can allow you to jump the development curve and focus resources on the future of the firm.

In your experience, what are the pros and cons of building out new infrastructure vs improving current processes?

For many banks, infrastructure has not been a priority, leading to a plethora of legacy systems and a spider web of data bases with significant overlaps as well as gaping holes. In those institutions, building whole new environments will be less taxing than attempting to enhance less than optimal platforms.

On the other hand; for large complex organizations, there is unlikely to be one platform that can solve every challenge. For those, it is likely to be a mix of new and old.

Either way, instilling a constant improvement mindset in your teams is essential to progressing in an ever changing regulation landscape.

How can both new and existing filers better prepare for the next round of stress tests?

Self-Assess and be honest. Glossing over your issues will only come back to bite you in big ways. By being realistic about your challenges and gaps, you will find improvement over a much shorter time horizon.

How do you see the role of the Stress Testing professional changing over the next 6-12 months?

The profession changed quite drastically in the last 12 months and the expectation is that it will continue to delineate along the size and complexity of your bank. Starting with SR15-18/19 and now the proposed rule changes, the FRB has reduced the burden on the relatively smaller less complex banks while continuing to increase expectations on the largest banks.

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