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Alternative Economic Scenarios

We cover it all: Stress testing, risk, and financial resource management

Our proven model-based scenarios assist financial institutions and corporate customers with all aspects of design, development, and quantification of macroeconomic and macro-financial variables necessary to measure risks, meet regulatory requirements, and comply with accounting standards such as CECL and IFRS 9. We also provide proprietary climate scenarios and scenario expansion services to support regulatory climate stress tests with full model transparency and expert support.

We leverage our award-winning integrated modeling framework to understand the impacts of alternative scenarios across sectors and throughout global and regional economies. The scenarios equip our customers with the data, results, and understanding needed to complete their capital planning and stress testing processes. Whether you want to satisfy regulatory requirements or implement best risk management practices processes, our solutions can support you with the highest level of transparency and rigor.

Risks and alternative paths for the US economy
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Climate scenarios and stress testing

Regulators around the world have begun to conduct climate stress tests or exploratory scenario analyses to assess the resilience of financial institutions to climate change and to transition towards net zero emission targets. Our economist and modeling teams support financial institutions undertaking regulatory climate stress tests or scenario analysis with modeling support and long-term projections of countless industry and country-specific variables. We construct and expand scenarios that are consistent with the assumptions provided by regulators such as the scenarios from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

We also support financial institutions’ internal climate stress tests and strategic planning with a set of proprietary climate scenarios. Our scenarios describe how different sets of stakeholders will shape policies and actions as we move towards a future with lower greenhouse gas (GHG) emissions including two net-zero cases. Each of the scenarios provides different implications for primary and final energy demand, global GHG emissions, and temperature pathways.
Our services include
  • Scenarios designed by our country and sector experts from across economics, energy, automotive, agriculture, and maritime divisions
  • Carefully crafted narratives including comparative tables and charts
  • Unique set of assumptions that include economic factors, the geopolitical environment, and focus on reducing GHGs through policies and carbon pricing, and consumer behavior
  • Sector level detail and bottom-up simulations from integrated industry models as well as top-down assessments
  • Data sets and detailed assessments of the scenario implications on the economy, on financial markets, and on asset prices, at a country by country as well as regional and global levels
  • Transparent model development and validation documentation
  • Customer support and direct access to the practitioners who construct and model the scenarios

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Regulatory stress testing: CCAR, DFAST, PRA and EBA

Our scenarios help financial institutions stress test their balance sheets against supervisory scenarios to comply with Comprehensive Capital Analysis and Review (CCAR), Dodd-Frank Act (DFA), Prudential Regulation Authority (PRA) and European Banking Authority (EBA) requirements. We help institutions to assess their risk profile and vulnerabilities by providing essential inputs to their stress testing models to calculate capital and liquidity measures under regulatory assumptions. 

Our services include:

  • Carefully crafted narratives for each of the scenarios, including comparative tables and charts
  • Fast turnaround following the release of regulatory assumptions to meet submission deadlines
  • Frequently updated scenarios and models
  • Customer support
  • Transparent model documentation
  • Access to supporting data, models, and experts
  • Up to 30 years horizon 

CECL scenarios

Financial institutions can use our suite of alternative scenario forecasts for the US national and regional geographies to develop impairment estimates required for Current Expected Credit Loss (CECL) compliance. We have taken care to consider where we are in the business cycle, volatility in the forecasts and other technical issues.

Our service includes:

  • US national and regional forecasts a base forecast, two optimistic and three pessimistic scenarios, updated quarterly
  • Quarterly narratives that accompany the scenarios
  • Probability weights of the  scenarios that use results from our proprietary factor model
  • Access to our team of economists
  • short-term (three-year) as well as long-term (30-years and beyond) forecasts

Our models, underlying narratives, and assumptions differentiate the scenarios as they are crafted by our US economics experts and built on our award-winning models. For clients with access to our models, we can provide solution files that allow you to refine the scenarios to suit your own narrative or create additional variations to assess a wider set of scenarios. Learn more.

IFRS 9 scenarios

Since 2018, the International Accounting Standards Board requires institutions to use forward looking expected credit loss criteria to determine loan loss provisions. Our scenarios provide reasonable and supportable forecasts using award-winning models updated quarterly with associated probability-weights required to calculate loan loss provisions.

Our service includes:

  • Expansions a set of off-the-shelf or of client-chosen scenarios to provide global, US, and regional forecasts
  • Quarterly scenario updates are available either as a refresh update to original or as a newly chosen scenario expansion
  • Available for the US and Global scenarios
For clients who also have access to our models, we provide solution files that allow you to refine the scenarios to suit your own narrative or create additional variations to assess a wider set of scenarios.

Stress testing and strategic planning

Access data, models, and award-winning experts to design, develop, and increase the effectiveness of your stress testing and internal liquidity and capital planning processes such as ICAAP and ILAAP. 

Our consultants work with financial institutions to design, develop, and increase the effectiveness of their stress testing and strategic planning frameworks. We assist institutions to define and implement strategies that are best suited to their stress testing and planning objectives. We assess business requirements for the development, customization, and implementation of macroeconomic scenarios and/or models. We also provide access to macroeconomic models used by our own economists, empowering clients to incorporate their views and assumptions to design their own scenarios for stress testing and strategic planning. We provide support and advice on model configuration and user training. 

Learn more about our integrated modeling framework

Scenario stress testing for front & middle office

Simplify the ever-growing complexity of regulatory stress tests with our Financial Risk Analytics division’s Scenario Stress Testing solution. Our flexible cloud-based scenario engine can expand regulatory prescribed shocks to the risk factors in your portfolio. Determine the P&L and capital impact on your trading book by feeding the shocks into our companion products: Traded Market Risk, Counterparty Credit Risk, and XVA.

Experts

Chris Varvares

Chris has nearly 40 years of experience in macroeconomic modeling, forecasting and policy analysis, as co-head of US Economics at IHS Markit (Now a part of S&P Global), in his previous role as a principal of Macroeconomic Advisers and as a member of the staff of the President's Council of Economic Advisers (1981-1982); he served as a member of the US delegation to the OECD in April 1982. Macroeconomic Advisers was acquired by IHS Markit in 2017.He and the IHS Markit (Now a part of S&P Global) US economic principals serve as consultants to key agencies of the US and foreign governments, major trade associations, and private corporations, and are widely quoted in the business and financial media. IHS Markit (Now a part of S&P Global) is widely recognized as among the most accurate forecasters of the US economy. Chris is a recent past president and a former director of the National Association for Business Economics (NABE). He served as president of the NABE Gateway chapter in St.Louis and is a member of the American Economic Association.He serves as a member of the New York State Economic and Revenue Advisory Board and has participated in the meetings of the Outside Consultants to the CBO, has been a panelist for the World Economic Forum, and he sits on advisory boards for the Olin Business School at Washington University and the Walker School of Business and Technology at Webster University. Chris holds a Bachelor of Arts in Economics from The George Washington University and received his graduate training (ABD) in Economics from Washington University in St. Louis, where he was also a member of the adjunct faculty in both the economics department and the Olin School of Business. He serves as a member of the New York State Economic and Revenue Advisory Board and has participated in the meetings of the Outside Consultants to the CBO, has been a panelist for the World Economic Forum, and he sits on advisory boards for the Olin Business School at Washington University and the Walker School of Business and Technology at Webster University.Chris holds a Bachelor of Arts in Economics from The George Washington University and received his graduate training (ABD) in Economics from Washington University in St. Louis, where he was also a member of the adjunct faculty in both the economics department and the Olin School of Business.

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Joel Prakken

A thought-leader on US economic outlook, monetary policy forecasts and fixed income markets with over 30 years of experience and expertise as a macroeconomic modeler, Dr. Joel has developed an unmatched structural-econometric model of the US economy. He co-founded Macroeconomic Advisers which was acquired in 2017. Prior to founding Macroeconomic Advisers, Dr. Joel held the position of senior economist at the World Headquarters of the IBM Corporation and before that he served with the Federal Reserve Bank of New York, US. He also has held positions on the faculties of New York University's Graduate School of Business, the Economics Department of Washington University, and the Olin School of Business at Washington University. He is the past president and a fellow of the National Association for Business Economics (NABE). He is also past president of the Gateway Association of Business Economists in Saint Louis. Dr. Joel has many publications to his credit, including papers written for the Council of Economic Advisers, the American Council for Capital Formation, and the Center for the American Study of Business on topics ranging from tax reform to budget policy to monetary policy to the impact of technology on productivity. He has testified on these topics before committees in both the US House of Representatives and the Senate. Dr. Joel has participated in meetings of the Outside Consultants to Board of Governors of the Federal Reserve System, is a past member of the Panel of Economic Consultants to the Congressional Budget Office and is a current member of the advisory committee of the Bureau of Economic Analysis.Dr. Joel completed his undergraduate degree in economics at Princeton University, and holds an MA and Ph.D. in economics from Washington University in Saint Louis, United States.

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Kathleen Navin

Kathleen joined IHS Markit (now part of S&P Global) through the 2017 acquisition of Macroeconomic Advisers, where she joined June 2010. Her primary responsibilities pertain to the US Macro Insights (USMI) service and to special reports and projects that utilize the proprietary macroeconomic model, MA/US. Kathleen is the technical lead on the Macroprudential Scenarios Service, coordinating and contributing to the development of scenarios and supporting products. In 2015, she became a member of the National Association of Business Economics' inaugural class of Certified Business Economists. She was a research associate at the Federal Reserve Bank of Kansas City in the division of Macroeconomics and Monetary Policy.Kathleen graduated with a Bachelor of Science degree in Economics in 2007 from the University of Missouri, where she went on to earn a Master of Arts degree in Economics in 2008.

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David Iaia

David oversees the state, metro, and county forecasts covering more than 300 metropolitan areas and 3,100 counties. He manages staffing and has an active role in development and enhancement of the group's data methodology. Additionally, he is the primary analyst for Virginia, Maryland, the District of Columbia, and Connecticut. He has done consulting work on the cost of doing business in states and for the U.S. Conference of Mayors on the importance of metro areas in the national economy. Prior to joining the company in 1998, David was a graduate student in economics at Brown University, completing all the requirements but the dissertation.He also holds a Bachelor of Arts in Economics from Amherst College.

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Michael Konidaris

Michael leads the product development for the CECL implementation by financial institutions. His responsibilities include the construction of cross-asset class econometric models, the development of forecasts for Libor, Swap and Corporate Bond rates, and the construction of simulations of global economic scenarios to evaluate the P&L of clients' portfolios.Michael joined S&P Global through the 2017 acquisition of Macroeconomic Advisers. He has worked as an economic consultant on the forecasting team at Roubini Global Economics and as a research intern at The Midway Group, a hedge fund specializing in the US residential mortgage market. He completed his military service as a sailor at the Hellenic Navy and co-founded and served at the board of directors of AUEB's Investment and Finance Club, the first ever finance club in a Greek University. Michael holds a Bachelor of Science degree in accounting and finance from Athens University of Economics and Business (AUEB), Greece, and a Master of Arts degree in economics from New York University (NYU), US.

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Metin Epozdemir

In this role, Metin partners with clients and the research teams to develop bespoke solutions that enable them to meet regulatory requirements and implement best practices for risk management. He is the voice of the customer for product development and research teams assisting with product roadmaps and research priorities. Metin is also responsible for providing subject matter expertise around the design and implementation of macroeconomic forecasting, scenario planning, stress testing, capital adequacy planning, and expected credit loss accounting (such as CECL and IFRS 9). Metin has more than 20 years of experience in finance, credit, risk management, and technology solutions. Prior to joining S&P Global Market Intelligence, he worked at Moody's Analytics, S&P Global, Crisil Global Research and Analytics, and Ford Credit Europe in a range of commercial and analytical roles to designing and implementing solutions for risk management.Metin has a Bachelor of Science degree in Mechanical Engineering from Bogazici University in Istanbul, Turkey. He is a CFA charter holder and speaks English and Turkish fluently.

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Jonathan Ablett

Jonathan leads the S&P Global Market Intelligence team in charge of scenario design and new macroeconomic and sectoral economic models. As part of this work, he helps develop customized macroeconomic scenarios for due diligence, regulatory stress tests, impact analysis, and strategic planning purposes. He leads the team that implements these scenarios, operates the proprietary macroeconomic model, and designs new models for additional client purposes.Prior to joining IHS Markit (now part of S&P Global), Jonathan was an Expert at the McKinsey Global Institute, the think tank of McKinsey and Company, where he specialized in applied economic and strategic analysis for both private and public sector clients. Prior to joining McKinsey, he worked at the Massachusetts House Ways & Means Committee developing budget and policy recommendations and the World Bank.Jonathan holds an M.A. in Economics from McGill University and an M.B.A. from Babson College.

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