Stress test for enterprises from Oracle

MUMBAI, INDIA: For Internal Capital Adequacy Assessment Process (ICAAP) requirements under Pillar 2 of the Basel II accord, Oracle Financial Services Software has announced an integrated, enterprise-wide stress testing solution.

A press release adds that this would be delivered using Oracle Reveleus Advanced Analytics Infrastructure, and the stress testing solution enables institutions to centrally develop, define and manage scenarios and shocks - and apply them across multiple risk categories including credit risk and market risk – to help provide a transparent and auditable means of performing regulatory and economic capital estimation.

The company adds that as the recent financial crisis unfolded, institutions and regulators realized that stress testing can no longer be carried out solely within the traditional siloed risk disciplines, but must address the interconnected nature of these risks and their combined impact on the overall capital adequacy of a bank.

“The stress testing solution enables institutions to overcome the recently exposed flaws in the traditional, siloed approach to stress testing by enabling banks to share and reuse their existing, calibrated risk models with shocks and stress scenarios that are common and consistent across the entire enterprise, thereby providing a holistic approach for stress testing management.”

“There is unprecedented regulatory pressure on financial institutions to comply with enterprise stress testing requirements and ensure that the lessons of the financial crisis have been learned and will not be repeated,” said S. Ramakrishnan, CEO of Oracle Reveleus and Oracle Mantas products, Oracle Financial Services Software.

"Modeling and analytics have been applied in silos," according to Guillermo Kopp, Executive Director and Global Research Fellow at TowerGroup. "And silos have allowed the concentration of credit, counterparty, liquidity and systemic risks to go unchecked. The ability to perform enterprise stress testing using an integrated platform and applying data in a consistent and timely manner to analyze the interdependencies between risk types is a big hurdle that banks are seeking to overcome."