Frequently Asked Questions about Invictus COVID-19 Stress Testing  

Invictus has been inundated with queries from banks about our pandemic stress testing services. Here are some of the top questions we’ve received.

1. Why can’t my bank use the stress tests we already have?

Any stress tests run before the virus began affecting the economy will not have the proper scenarios in place to give meaningful results. They are obsolete. Bankers can’t rely on legacy stress tests that are not driven by loan-level data and do not account for the economic changes that have taken place since the coronavirus struck the United States.

2. Most of the stress testing systems I’ve used are boilerplate. How is the Invictus system different?

Our stress test scenarios are continually updated. We customize the tests for your bank using your loan-level data. We assign someone from our data team to work with your bank to make sure we have the right data in place before we even run a test. We also rely on our BankGenome™ intelligence system, which include millions of loans, plus other economic data, to help guide our analysis. Unlike traditional stress testing models that focus on historically generated generic information, our system has been tracking the actual performance of individual loans distributed across different industry segments for more than a decade. We use a PD/LGD methodology, marrying both a bottom-up and a top-down approach.

Our consultants will help your management team fine-tune the results and prepare a presentation for your board.

3. How does your process work?

We provide an initial diagnostic analysis, a defensive plan, an offensive plan, and then we repeat the tests, so you are always on top of the changing situation. We can get you results within three weeks of receiving your loan-level data. Our team will work with yours, answering your questions and guiding you through the process. We do not leave you alone with a black box, trying to figure it out. Our hybrid approach ensures that you have the most up-to-date analytics available in the marketplace, along with a team that helps you interpret the findings and explain them to your board, shareholders or regulators.

4. Why do I need a stress test now? I’ve got enough to handle without spending extra money on something that regulators aren’t even requesting.

That’s a good question. Our stress tests are intended to guide banks through the pandemic, helping CEOs identify their most vulnerable loans and determining at what point their capital might be at risk. Banks need to know where their capital stands now and what triggers might affect their safety net. The stress test will help banks plan strategically for what might be coming down the road. It also helps smart banks identify opportunities that can help propel their bank forward. Our stress tests are not intended to be used for regulatory compliance (though regulators have often embraced them). We want our CEOs using them to augment their strategic decision-making. Banks have also used our tests to guide their qualitative factors when calculating their loan loss reserves, to determine whether an M&A target is a good fit for their bank, and as a means test for their strategic plans.

5. What is the Invictus Group’s expertise in stress testing?

Invictus got its start after the 2008 financial crisis, working with the regulators and training regional regulators in the concepts of stress testing for capital adequacy. This extensive experience is part of our DNA and allows us to evaluate the impact of national and regional changes across the entire range of SIC codes in the United States. This experience has been gained in a decade of hands-on work with banks and regulators across the country.

6. What are my next steps?

Please reach out to George Dean Callas for a customized proposal or presentation. We customize the stress testing for each bank, so we can’t give you a cost estimate until we understand your situation. Our system includes the stress tests, the BankGenome™ intelligence system and our consulting, which is available whenever you need it. You pay just one price that doesn’t change, even if you need extra assistance.