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What is the “17-4 Test” that I hear examiners talk about?

April 26, 2017Examiners hear talk

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What is the “17-4 Test” that I hear examiners talk about?

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The “17-4” test is a simple model examiners use to assist in setting their examination scope for the ALM review. It attempts to measure the projected change in net worth after a +300 basis point instantaneous and parallel interest rate shock. The change in net worth is determined by calculating the approximate price loss on mortgages due to the rate shock. Securities subject to FAS 115 are also included in the analysis.