Regulatory stress tests are among the most powerful tools to determine whether large banks have adequate capital to withstand the impact of adverse economic and market conditions.
At the same time, banks are under increasing pressure to control the costs associated with soaring regulatory and compliance requirements – costs that strain their operating budgets.
Consequently, financial firms are looking for ways to more accurately and efficiently meet mounting data requirements to improve performance and drive growth.
Stress tests are causing large banks to incur $10 million per year in operating costs and another $30 million to $50 million in technology costs, according to a survey of 39 CCAR and DFAST banks conducted by Moody’s Analytics.
This includes the money that banks spend to audit, augment, and aggregate data from across multiple sources to satisfy stress test requirements.
These requirements make it extremely difficult for compliance officers to aggregate all the data that’s needed from various disparate sources to conduct effective CCAR and Dodd Frank stress testing. And it’s only going to get even more challenging for compliance officers.
However, stress testing can incentivize banks to collect better data, expand their quantitative analytical capabilities, and become involved in more robust risk management practices, a report by the FDIC notes.
Financial firms need a solution that allows them to accurately compile and analyze data from across the enterprise that is housed in disparate, departmental silos that are not connected.
There’s an endless list of applications that could be created much more efficiently using an agile methodology. If you can change the way you think about approaching these problems you can do things much faster, much more flexibly and at the same time much higher quality.
The use of advanced data preparation tools can help compliance officers gather and analyze the vast streams of compliance data that bank holding companies need to meet CCAR and DFAST requirements as well as operate more efficiently and dramatically reduce the costs associated with stress testing.
Watch the this video to learn about agile analytics for regulatory compliance.