What are some of the challenges encountered when implementing a stress testing program?
– Some institutions do not have current or relevant borrower financial data in their loan portfolio database. This is particularly true for mortgage loans that are performing and require little ongoing contact between the borrower and the loan officer. Nevertheless, without updated financials on performing loans, the institutions may not know if the borrower is under stress until the loan goes past due. If incomplete and/or stale borrower data on commercial and mortgage loans is too prevalent in the portfolio, the institution may be forced to make additional assumptions or use proxy data when conducting any loan portfolio management analyses, including stress testing. It may also be possible to incorporate credit scores into the stress testing analysis. In other words, meaningful stress tests can and should be completed even in the absence of borrower level financial data. Institution size and complexity – Some associations are relatively small and have non-complex portfolios. The mana
