Agmi says a flexible, centralized stress testing infrastructure can help accomplish the goal of the stress tests, which is to enable a bank to demonstrate to regulators and other parties it has made adequate risk and reserve provisions to absorb unprecedented future shocks to the economy.
"Prior to the 2008 crisis, stress testing had been constrained by historical data and there were few forward-looking elements," says Agmi.
Agmi says while the 2008 crisis had some similarities to prior crises, such as the hedge fund crisis of the late 1990s, there was a confluence of systemic economic risks that has not been encountered before. "It's not just one factor that is stressed or shocked at a bank, it's multiple factors at the same time, so now we are seeing stress testing of different variables around a financial institution, whether it's around funding, liquidity or counterparty default," Agmi says.
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