CapiTool

CapiTool

Capital under stress scenarios projection tool

by WillahScott @ WiDo Stuff

CapiTool Overview

Regulatory capital requirements (for financial institutions) simulation under different user-defined macoeconomic scenarios

The app is available through shinyapps.io. Click image to redirect.

CapiTool Usage

Inputs

• Macroeconomic variables
  • Variables: GDP - Unemployment - Consumer Price Index - House Prices - Rates
  • Scenarios: Base - Adverse - Severely Adverse - Extreme Recession
• Projection Window: 2015 - 2016 - 2017
• Product Breakdown: Mortgage - Consumer Loan - Credit Card - Lease

Outputs

• Total projected capital requirements
• Projected capital requirements by product

Basic usage information may be found under the About tab in the application.

Stress Testing Regulation

The Capital Requirements Directive (CRD IV) establishes the amount of capital a bank must have allocated, given as a set of functions of the estimated probability of default (for performing products), severity and exposure, one function for each different product.

The Stress Test exercise regulation put forth by the EBA requires a 3 year projection (or US Stress Test, CCAR establishes 9 quarters projection) of regulatory capital. CapiTool allows up to 3 year projection.

The (European) Stress Test exercise requires two scenarios set forth by the EBA, as well as any scenarios required by the national regulators. For the US CCAR exercise, 3 exercises are necessary, as well as two internal scenarios which the institution has to create.

CapiTool stresses the different factors (mainly probability of default and severity) and simulates the projected capital requirements under the scenario defined by the user.

R Implementation

The app is implemented in R through RStudio's shiny package, which needs a ui.R and server.R. Additionally all further calculations take place in the simulation.R.

Data

CapiTool uses two loan databases:

Performing portfolio

    source("simulation.R")
    table(performing.df$Products)

## 
## Consumer Loan   Credit Card         Lease      Mortgage 
##           322           665           176           395

Defaulted portfolio

    table(defaulted.df$Products)

## 
## Consumer Loan   Credit Card         Lease      Mortgage 
##           310            31           171           157

by WillahScott @ WiDo Stuff