Stress tested? Not you, your credit union’s transactions! Although credit analysts work in the background, they play an extremely crucial role in identifying, measuring, and monitoring credit risk. Stress testing is one tool they can use. This in-depth webinar will explain transaction-level stress testing for both commercial non-real estate and commercial real estate loans.
- Recognize the need for stress testing at the borrower level
- Determine which factors (based on loan type) should be considered in stressing a borrower’s repayment ability for both commercial real estate and commercial and industrial loans
- Understand the impact of stressed cash flow on both repayment ability and commercial real estate value
- Distinguish between stress testing based on predetermined factors and the breakeven point for individual borrowing entities
- Describe the impact of borrower stress testing within a loan presentation and how the stress test impacts loan decisioning and risk rating
Credit analysts are charged with identifying, measuring, and monitoring credit risk in any
given transaction. An analyst must understand the borrower’s sustainable repayment
ability, including both primary and secondary repayment sources. Repayment ability in a
“normal” or positive market condition can be relatively easy to determine and used as a
basis for the loan decision and risk rating. However, market conditions are not always
favorable and adverse conditions can arise relatively quickly (as in 2020). When
underwriting, credit analysts should apply factors which reflect the impact of an adverse
market on a borrower’s primary and secondary repayment sources. This presentation will
provide insight for credit professionals regarding transaction-level stress testing, including
impact to operating income, guarantor support, and collateral, and will include
considerations for both commercial non-real estate and commercial real estate loans.
Aaron Lewis, Young & Associates, Inc.
Aaron Lewis is a senior consultant at Young & Associates, Inc. With over 15 years in the banking industry, his expertise is now dedicated to the lending division of Young &Associates where he assists financial institutions with loan, ALLL, policy, and credit process and compliance reviews. He also conducts seminars on credit risk and compliance.
Prior to joining Young & Associates, Aaron was the Vice President Credit Administrator of a community financial institution in southeast Michigan and managed all facets of the lending function, including originations, underwriting, ALLL analysis, servicing, and secondary market compliance. He holds a Bachelor’s in finance from Michigan State University and graduated from the Graduate School of Banking, University of Wisconsin.