Insights & News
Insights on risk management, model development, loss forecasting, CECL, and stress testing from practitioners who build the models. Thought before calculation, every time.
Seasoning curves show defaults or losses as a function of loan age or time-on-book (TOB).
Using publicly-available Fannie Mae mortgage data, we show the vacuity of the notion and the relationship.
TOB is an insufficient statistic for more fundamental risk factors that can be directly used.
Recent Insights
How to Incorporate Tariffs into Loss Forecasts
Read more: How to Incorporate Tariffs into Loss ForecastsWith the uncertainty and possible economic harm surrounding the recently-announced tariffs—whether they stay, disappear, reappear, or mutate—bankers face the challenge of integrating their effects into Current Expected Credit Loss (CECL) and stress test estimates.
Are Banks Ready for a Downturn in 2025?
Read more: Are Banks Ready for a Downturn in 2025?It’s been fifteen years since the last long and deep downturn. Alas, periods of calm are not proof of resilience against harm, and in fact, they may obscure risks that may define the next downturn.
It’s Never about Capital!
Read more: It’s Never about Capital!Since Silicon Valley Bank’s demise, many of the usual suspects have been yapping and editorializing about the importance of capital and capital ratios, but it’s never about capital. It’s always about liquidity!
SR 15-18 vs SR 15-19 vs HCR – What Are the Differences?
Read more: SR 15-18 vs SR 15-19 vs HCR – What Are the Differences?Below, we summarize the guidance and analyze the recent revisions to the tailoring framework. We focus on CCAR Supervisory Expectations for Category I (US GSIBs) vs. Category II or III (≥ $250B total assets) banks but also mention Category IV banks and Horizontal Capital Reviews (HCRs).
Spero Risk President Interviewed on Risk Management Podcast
Read more: Spero Risk President Interviewed on Risk Management PodcastMatt and Andy talked about best practices for managing risk and trends in the industry and how Andy built a career in this fast-growing area, plus, what advice he has for those just starting out.
The Seven Principles of an Effective Capital Adequacy Process
Read more: The Seven Principles of an Effective Capital Adequacy ProcessSpero Risk Associates has substantial experience with all aspects of CCAR, especially model development and validation. We have asked the questions, and we have successfully answered when others have asked. The seven principles of an effective capital adequacy process were published in August, 2013, in the Federal Reserve’s Capital Planning at Large Bank Holding Companies: Supervisory…
Three Components of Validation
Read more: Three Components of ValidationWe like to think of the three main components of validation like Cerebus – validation encompasses the past, present, and future. 1. Evaluation of conceptual soundness, including developmental evidence. 2. Ongoing monitoring, including process verification and benchmarking. 3. Outcome analysis, including back-testing.
