Banks ‘not confident’ in legacy stress testing

Just 14 per cent of financial services firms are confident their legacy technology systems can fulfill new stress testing requirements, according to figures released today.

The survey of FS executives features in a report by Wolters Kluwer Financial Services, which examines today’s global stress testing environment and suggests that banks are missing an opportunity to embrace stress testing as a discipline that is “good for business” as well as compliance.

Stress testing has become a prominent feature of many regulations, from Basel III to Dodd-Frank. The paper noted that although the added complexity makes stress testing more onerous, banks could view the requirements as a chance to integrate stress testing into an integrated risk management framework.

“As stress testing becomes more intricate on a global level, more will be asked of the systems in place that monitor activities, gather data and apply models to analyse it,” said Richard Reeves, vice president of strategy for OneSumX at Wolters Kluwer Financial Services. “This is more than a compliance issue as stress testing fundamentally exists to evaluate how firms respond to a crisis. With the right systems in place there is an opportunity for firms to improve decision making, building stronger and more profitable institutions.”

A separate report released last week by the Global Association of Risk Professionals and SAS, found that while stress testing procedures were becoming more mature in the banking sector, gaps in technology could be hampering the realisation of further benefits.

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