The role of internal audits in capital adequacy planning and stress testing

The role of internal audits in capital adequacy planning and stress testing

Q1 – Nabeel please can you tell our readers a little but about yourself, your role, and your experience at Credit Suisse.

 I was hired by Credit Suisse to set-up and manage the CCAR and IHC audit functions in advance of the firm’s transition to an IHC and its first CCAR submission. Since joining the firm in late 2015, I have recruited and managed an audit team with strong expertise in all CCAR components. I also developed and successfully executed a multi-pronged audit coverage approach incorporating supervisory expectations and leveraging market best practices to provide a robust end-to-end coverage of the CCAR process.

Q2 – Nabeel, we are looking forward to your presentation at the Risk Americas 2017 Convention. You will be covering the role of internal audits in capital adequacy planning and stress testing. Why do you think these are key talking points?

Remind the listeners about the historical background and motives behind FRB decision to implement CCAR. Regulatory Expectations for Internal Audit’s role in CCAR. Key best practices for Internal Audit’s role in CCAR. CCAR as a transformational process. Overall CCAR Audit coverage approach. Specific focus on audit coverage of Change Management, Model Risk and Data as it pertains to CCAR. Evolution of CCAR over the years and future direction under the new administration. CFO Attestation requirement and the role of Internal Audit. RWA validation and the role of Internal Audit.

Q3 – Can you give an overview as to the role audit currently plays in capital adequacy planning and stress testing, and how you think this may evolve?

US Regulators expect Internal Audit to play a key role in evaluating the adequacy of the capital planning process and in assessing whether the risk management and internal control practices supporting that process are comprehensive and effective. In this regards Internal Audit is expected to provide a comprehensive and robust review of the end-to-end capital planning process and all its components including key control elements, at least, annually

Q4 – In the next six to 12 months what key challenges do you see for auditors within stress testing? 

Understanding and reacting to evolving regulatory expectations. For LISCC BHCs and new IHCs submitting capital plans for the first time ensuring compliance with continued higher regulatory expectations. Internal audit’s role in RWA validation and CFO attestation

Q5 – Do you see the role of the audit or stress testing professionals changing as new Dodd Frank Act reforms become clear from President Trump?

Yes, but will depend on the changes made in Dodd Frank act. For LISCC BHCs and IHCs and the role is not likely to change significantly over the next few years.