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Stress testing: withstanding the resource crisis

The banks are under intense pressure to prove they can withstand future crises, but that's just half the story. 

Financial institutions are at breaking point, trying to balance compliance obligations with the need to modernise core systems. The capital adequacy tests, often referred to as stress tests, involve highly manual, IT-intensive efforts - with data being pulled from up to 100 systems and data sets, across various lines of business, risk management functions and subsidiaries. 

With data spread across multiple legacy systems, the challenge is finding the right data to assess and then demonstrate that the bank has the capital liquidity to survive in a crisis. Those banks that are further down the line of re-architecting underlying infrastructure hold an advantage. Not only are they able to demonstrate how balance sheets would be impacted by future fluctuations in economic conditions but they are also in a position to increase the amount, quality and insight of reporting.

In a report commissioned by Delphix, just three of an 18 strong panel of compliance professionals, said their primary objective was to comply with the stress-testing regulations themselves, the rest seeing it as an opportunity to increase business insight. 

As a standalone IT project, stress testing is a large and necessary evil. With speculation building that the regulator will introduce wider-ranging and more comprehensive testing next year (not to mention the new reporting requirements that may emerge in other areas), financial institutions must continue to view this exercise as part of a wider modernisation initiative for improving data and reporting. 2015 will be the landmark year where modernisation programmes start to deliver; instead of compliance competing for resource with innovation teams, the two sides will finally be able to co-exist. 

In time, stress testing will become a routine task, with the changes that make this happen also acting as a springboard for increasing automation, improving efficiencies and gaining greater insights into the financial resiliency of the business. 


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