Stress Testing

  • Jeffrey Stokes, Ph.D., ”How Much Stress Is Implied by Dodd-Frank Annual Stress Test (DFAST) Scenarios?,” (January 2016). Little is known about the extent of the stress implied by the scenarios in DFAST beyond their ordinal descriptions as baseline, severe, and severely adverse. In this paper, Kullback-Leibler divergence is suggested as a mechanism to assess how much stress is implied by each scenario. Download
  • William Hood & William Nayda, Ph.D., “Using Stress Testing Results to Define Bank Risk,” (RMA Journal, October-November 2012). This is the third article in a series on stress testing. The first article discussed the purpose of stress testing and the role it plays in an effective ERM program. The second article examined the methodologies and techniques used in stress testing. This article describes how stress testing can be used in support of defining a bank’s risk. It discusses the role stress testing plays in setting appropriate limits/triggers and in conducting strategic planning, and how the test results can guide the risk decision process and risk mitigation strategies. The authors also offer some tips for stress-testing monitoring and reporting. Download
  • William Nayda, Ph.D.; “Stress Testing Methodologies and Tools,” (RMA Journal, September 2012).  This is the second installment in a series on stress testing in community banks. The article in last month’s issue covered the purpose of stress testing and its importance in a well-functioning ERM program. This month’s article discusses the various methodologies and tools that can be used when conducting a stress test. Download
  • William Nayda, Ph.D.; ”Taking the Mystery out of Stress Testing,” (RMA Journal, July-August 2012).  This is a practical introduction to stress testing and scenario analysis. It is designed to take some of the mysteries out of developing a comprehensive stress testing program. It provides history on bank stress testing and an introduction to the basic stress testing concepts. This is the first in a three-part series on stress testing and designed to supplement the RMA’s Stress Testing Workbook which Second Pillar Consulting played a large part in authoring. RMA members can access the article. Download
  • “Stress Testing Workbook,” RMA 2012.  William Nayda, Ph.D. of Second Pillar led the creation of the RMA’s stress testing workbook. This workbook is designed for the community bank practitioner in a bank under $10 billion in size who is tasked with created a stress testing program. It provides insight into the tools banks should consider, pitfalls to avoid, and how to incorporate stress testing results into management decisions. Download

Risk Management

  • “Enterprise Risk Management: A Staged Approach, A Second Pillar Consulting White Paper” (2015) Download

Anti-Money Laundering

  • “AML Model Validation in Compliance with OCC 11-12: Supervisory Guidance on Model Risk Management;” Susan Devine, Association of Certified Anti-Money Laundering Specialists, August 2016. Download
  • William Nayda and Rona Pocker; ”Model Validation of Transaction Monitoring for Anti-Money-Laundering Activities,” (RMA Journal, March 2013).  RMA members can access the article. Download