Leading banks still grapple with stress testing, says survey from SAS and Longitude Research

Majority still at early stage of development, cite data management and skills shortage as top challenges

Stress testing is a given for banks, as regulations and compliance pressures loom. Yet only one in four banks say they're highly mature at it. And in a recent study by Longitude Research and business analytics leader SAS, about four in 10 admit to lingering at early stages of development. Immature stress testing can cause regulatory scrutiny of accuracy and processes. Also, banks incur costs for missed opportunities and wasted resources through laborious, manual operations that fail to reap data for other business initiatives.

The in-depth survey of more than 100 senior banking officials across Europe and the US assessed the effects of stress testing within organisations.

Just 24 percent of banks acknowledge making any changes to their strategic decisions as a result of stress testing, although 33 percent have adapted their institution's risk appetite in regards to making better business choices. Respondents noted data issues (35 percent) and a skills shortage (32 percent) as the biggest challenges for banks today. They blame data quality and quantity for their struggles with data management, especially data aggregation and consolidation.

"Stress testing is now a fact of life for many banks. However, while a sizeable minority have clearly matured in their ability to deal with these tests, there are a significant number of banks that still have their work cut out for them," said James Watson, Editorial Director at Longitude Research. "This is especially true when it comes to the next step ahead, using stress testing as a tool to improve the wider management of the business."

To strengthen stress-testing frameworks, 47 percent of bankers cited a need for dedicated resources, particularly internal staff, external consultants and IT infrastructure. Other key priorities included fortifying modelling capabilities and improving data quality. Although 41 percent of banks said past stress tests hadn't directly influenced business, more than half believe that in two years the tests will help drive strategic decisions.

"Stress testing is not just a compliance box-ticking exercise, it is an essential tool for bank's determining risk management," said Dale Stevens, Head of Risk at SAS UK & Ireland. "However, automation is fundamental if banks want to gain maximum value from stress testing. This includes areas such as scenario and model management so banks can comply with regulatory demands whilst gaining critical business insights to help drive success."

How banks can gauge stress-testing maturity

To assess their relative degree of stress-testing maturity, banks can use a new SAS Stress Test Benchmark, developed in cooperation with Longitude Research. In just five minutes, firms can gauge resourcing levels, relative priorities, leadership engagement and investment. And they can compare their responses to those of more than 100 senior risk and finance executives within European and North American banks.

Today's announcement came at The Premier Business Leadership Series event in Las Vegas, a business conference presented by SAS that brings together more than 700 attendees from the public and private sectors to share ideas on critical business issues.

 

About SAS

SAS is the leader in analytics. Through innovative analytics, business intelligence and data management software and services, SAS helps customers at more than 83,000 sites make better decisions faster. Since 1976, SAS has been giving customers around the world THE POWER TO KNOW®.

 

 

Editorial contacts:

Stress Test Infographic

Stressed Out?

How European and US banks are responding to regulatory stress tests
Download Whitepaper

Back to Top