Regulatory: European Stress Test Scenarios



Meet the BoE/PRA and ECB/EBA stress tests requirements with confidence, using comprehensive macroeconomic forecast scenarios produced, vetted and maintained by an authoritative source.

Moody's Analytics can help with both the common baseline and stress scenarios provided by the ECB/European Banking Authority and the BoE/Prudential Regulation Authority, as well as with the bespoke scenarios individual firms need to develop. Our global view, depth and consistency is highly valued by our banking clients and regulators and is supported by a high degree of transparency and detailed documentation.

We are well positioned to help due to our extensive experience of more than 80 economists who have developed and maintained alternative scenarios for over 10 years. These have included shock-specific scenarios, regulatory scenarios as well as bank/institution specific scenarios. In addition to the these, we provide scenarios based on projections provided by the U.S. Federal Reserve and other local authorities for more than 50 countries.

Beyond these regulatory-specific scenarios we maintain a handful of alternative scenarios that are updated every month for more than 50 countries. These alternative scenarios are updates are based on client feedback regarding alternative paths they are concerned about and our own view of major risks or opportunities in the global economy.

We Can Help Along Three Key Dimensions

1. Expanded Common Scenarios

Fully expanded, common baseline and stress scenarios for all large economies. This is not just for the UK economy but all other major economies you may have exposure to such as the United States, China, Austria, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, etc.

We construct plausible narratives based on the forecasts and guidance provided by the regulators and an understanding of the key threats to the global economy. This filling-in of the narrative and the global context allows us to produce economically-consistent, global scenarios for major countries. Most Importantly, we meaningfully expand the variables for these scenarios to include indicators not specifically provided by the regulators, including sector-specific industrial production, various interest rate and yield curves, more detailed housing and labour market metrics, and many client-specific indices.

2. Bespoke Scenarios

We can help you design bespoke scenarios tailored to your business model and in this process leverage your existing stress testing and risk identification processes, including reserve stress testing to inform your institution-specific scenario design. Our experience and proven track record will help ensure timely delivery supported by thorough and detailed documentation which is key for the high level of transparency regulators require.

We'll help you construct economically sound scenarios that are reflective of your lines of businesses, geographic footprint, product offering, and overall business model. We leverage our team of more than 80 economists with whom have extensive experience in building bespoke scenarios, to turn these around very quickly while providing the necessary transparency, cooperation and documentation required for this type of work required by management, regulators and other stakeholders.

3. Loss Forecasting & Stress Testing Solution: Moody's CreditCycle™

Moody's CreditCycle is an industry-leading solution to any stress testing or loss forecasting need. By linking a series of consumer credit models to econometric and statistical forecasting tools and then combining them with our regional, national and international economic forecasting and analytic capabilities-the result is the most comprehensive consumer credit solution available: integrated consumer credit analytics and regional economics, driven by your own strategies and assumptions.

Key Differentiators

1. Comprehensive & Expanded Coverage

We run the projections provided by local authorities through our macro forecast services, covering more than 50 countries and including more than 1,800 variables for modeling various asset classes, many of which are not available elsewhere.

COVERAGE

  • 30-year scenarios for more than 50 countries, the US and all states and metropolitan areas.
  • Coverage of major concepts, including: personal consumption expenditure, debt-service burden, bankruptcy rates, initial claims, sector specific industrial production, interest rate and bond yield curves, detailed housing and labour market performance metrics, demographic series, many client-specific indexes and more.
  • Monthly updates, using the latest economic data and conditions.
  • Narratives for each scenario detailing forecast assumptions.

2. Dedicated Team of Experts

We have a team of experts dedicated to helping clients with the stress-testing process. They leverage the best-in-class modeling and analytical expertise of nearly 80 economists extensive experience in national and regional data management and forecasting.

  • JUAN LICARI, PhD

    Dr. Licari and his team develops and implements risk solutions that explicitly connect credit data to the underlying economic cycle, allowing portfolio managers to plan for alternative scenarios. These solutions are leveraged into stress-testing and reverse stress-testing practices.

  • PETR ZEMCIK, PhD

    Dr. Zemcik is director of economic research at the Moody's Analytics London office. He is responsible for analysis, modeling, and forecasting for Europe.

3. Transparent & Fully Documented

Our forecasts and scenarios are fully documented, rigorously checked for accuracy and updated monthly reflecting the latest economic data and conditions. We furnish a detailed methodology for validation purposes and provide complete access to our analysts so that you may fully understand the underlying assumptions. Your complete economic and product understanding is our highest priority and our commitment to you.