FOR IMMEDIATE RELEASE:
Risk Integrated Releases Quarterly CCAR Model for Commercial Real Estate
New York / London – May 19, 2016 – Risk Integrated, the leading international risk solution provider for commercial real estate, today announced the release of a quarterly cashflow simulation model (CFM) specifically tailored to the requirements of the US regulatory Comprehensive Capital Analysis and Review (CCAR) stress tests. In addition to breaking the risk into granular, quarterly time steps, this new model requires less input data and is easier to use and maintain.
The CCAR CFM is built on the same foundation as the comprehensive fully detailed CFM that clients are currently using in the Specialized Finance System (SFS) for grading and deal structuring as well as Basel III and Solvency II regulatory compliance. The full model takes into account the many features, such as covenants, lease terms, etc., which can change the risk of a commercial real estate financing, and are especially useful when structuring new credits. By building on the same foundation, the new CCAR CFM model leverages the proven track record of the full model (see Validation of the Specialized Finance System). However, the CCAR CFM has been optimized and greatly simplified such that it only requires data which is available from the CCAR dataset (the FR Y-14Q data).
At a portfolio level, the new model gives very similar results to the full model. The graph below illustrates a portfolio's cumulative loss, quarter by quarter, for the CCAR stress, comparing the quarterly losses with the average losses from annual time steps.
At this time there is increased regulatory pressure for institutions to only use capital models that they control and understand in full detail - i.e., not to [...]