How do FDIC and others assess bank's risk?

How do they assess bank’s risk? VAR or capital at risk or other methods such as scenarion or stress models? Is capital at risk assessed by the same methods as VAR? Appreciated your thoughts.

EVE

EVE?

ADAM

economic value of equity - its one method that is used…

They send under-qualified pencil necks to the banks to look over documents and review loans. They usually find one unimportant piece of minutiae to get hot and bothered about and find great pleasure over including it in their report. This after typically rubber stamping the bank’s own credit risk ratings for their loans and not making any adjustments to loan loss reserves. In a nutshell, the system is broken.

FDIC nominally uses a system with the acronym CAMELS - Capital Asset Quality Management Earnings Liquidity Sensitivity to Market Risk (focus is on rates/duration) I’ve spent a fair amount of time working with banks on these types of issues. EVE is absolutely one thing the FDIC looks at but is usually in the context of rate risk and isn’t the dominant factor right now (Capitalization and Asset Quality are). If you have more questions I’d be happy to help you out- email is danceswithspreadsheets at gmail

OTTI is a huge issue right now, especially for banks with a ton of non agency mbs that require level 3 pricing

They just ask the regulated entities if they have enough money, and if the answer is “yes” then we are all good to go.

Shrute Farms Wrote: ------------------------------------------------------- > They send under-qualified pencil necks to the > banks to look over documents and review loans. > They usually find one unimportant piece of > minutiae to get hot and bothered about and find > great pleasure over including it in their report. > This after typically rubber stamping the bank’s > own credit risk ratings for their loans and not > making any adjustments to loan loss reserves. In > a nutshell, the system is broken. ha! are you a banker who has experienced the bank examination process?

tom18606 Wrote: ------------------------------------------------------- > How do they assess bank’s risk? > Not very well.

eriqnoodle Wrote: ------------------------------------------------------- > Shrute Farms Wrote: > -------------------------------------------------- > ----- > > They send under-qualified pencil necks to the > > banks to look over documents and review loans. > > They usually find one unimportant piece of > > minutiae to get hot and bothered about and find > > great pleasure over including it in their > report. > > This after typically rubber stamping the bank’s > > own credit risk ratings for their loans and not > > making any adjustments to loan loss reserves. > In > > a nutshell, the system is broken. > > > ha! are you a banker who has experienced the bank > examination process? I used to work at a bank. Bank exams are a complete joke. Absolutely worthless.