Stress testing measures the capital, earnings, and ALLL impact of unexpected, negative events. As such, stress testing is an important strategic and capital management tool; one that helps to identify proper capital and risk levels, which in turn allows the Bank to make adjustments as necessary.

There are many types of stress tests and there is no one correct methodology. However, a good stress test is one that returns plausible results given the assumptions, and is readily understandable. SRA stress tests have the following attributes: (1) they are whole bank tests, i.e., all assets (not just loans) and contingent liabilities are stressed; (2) they utilize 4 scenarios which are Expected, Mild Down, Moderate Down, and Severe Down; (3) earnings estimates for each of the 4 scenarios is estimated, and (4) an estimated capital surplus/need is presented for each scenario.

SRA provides three types of stress tests, all of which contain the four attributes listed above. Our most comprehensive test utilizes a “bottoms up” (review of select individual loans) approach to stress commercial loans and contingents, OREO, securities, other assets, and other contingent liabilities. Residential loans, including HELOCs, and other consumer loans are stressed using a “top down” or portfolio level approach.

SRA’s stress tests are easy to understand; all assumptions and their impact on earnings and capital are clearly identified and explained in the stress test report.


  • Helps identify strengths and weaknesses in individual loans, loan product categories, and the overall portfolio.
  • Enables better risk appetite calibration.
  • Identifies potential balance sheet and earnings vulnerabilities, and provides critical data for development of capital and strategic plans.
  • Improves credit risk management at the loan, relationship, product, and portfolio level.
  • Enhances the establishment of credit limits based on capital at risk rather than an arbitrary percentage of capital.
  • Highlights cash flow and collateral data collection strengths and gaps.
  • Supports loan review scoping, sampling, risk rating validation, and portfolio findings.
  • Enhances credibility with a bank’s regulators.


SRA’s stress test team is comprised of former senior level bankers and regulators who have made and collected all types of loans. We have a deep understanding of both credit and whole bank operations.

Optional Independent Loan Review

Loan level stress tests are an optimal time to complete an independent loan review. Since we are already working in your loan files, it is an excellent time to review the loans and reaffirm the risk ratings. The pricing for our Independent Loan review is discounted when undertaken in combination with a Stress Test.