Federal Reserve examiners reviewed the CCAR and DFAST (stress test reporting) processes, related to Dodd-Frank regulatory compliance, of a large US Bank that was a SIFI. The Fed review concluded that this bank needed to review its stressed valuation scenarios, enhance its living will and recovery and resolution process documentation. The bank separately decided to perform an independent fair valuations assessment for its balance sheet assets, for fair market value and stressed scenarios.
Valuation professionals completed a valuation forensics assessment along with the commercial banking teams originating the loans. The work involved coordination with credit, risk and finance teams responsible for booking the trades. It involved working with the bank’s economists and pricing quants to assess the veracity of the stress scenarios and assumptions made. A central clearing house for enterprise data was established and independent valuations performed.
Valuation professionals assisted the bank enhance documentation related to the stress testing and recovery and resolution scenarios. Detailed valuation reports by loan portfolio were created after conducting independent valuations. This assisted the bank in re-submitting a CCAR and DFAST recovery and resolution plan to the Federal reserve later that year.