Whether you perform ALM modeling in-house or outsource this activity to a service provider, there is enormous value in having a “second set of eyes” examining the critical data inputs that generate results.
EasCorp offers two levels of validation services on a project basis. If you would like an expert, independent view of your modeling program, we recommend the Model Validation Service. If you would like to add an independent test of the integrity of your credit union’s ALM data handling and modeling, based upon our re-performance of calculations, we recommend the Model Validation Plus Service.
MODEL VALIDATION SERVICE
- EasCorp reviews your latest ALM modeling report package including all the major assumption inputs, i.e., discount rates, prepayment speeds, product re-pricing betas, and non-maturing deposit valuations for the purpose of testing their reliability and conformance with industry best practices.
- We review your ALM policies and provide you specific recommendations for improving deficiencies or inconsistencies based upon best practices and or/regulatory guidance. We also review and provide specific recommendations for improving the quality of ALM decision making, including communications (format and/or content of your reports), as well as staff or elected official training regimens.
- You are provided an in-depth written report of findings and recommendations in an easy to read narrative. A draft report is presented initially for management’s review and comment, after which it is prepared and presented in final form.
- The Model Validation Plus Service meets all state and/or federal regulatory expectations and will prepare you for examiner scrutiny of your ALM modeling process so that there are no surprises during or after the next examination.
MODEL VALIDATION PLUS SERVICE
- Includes all of the features in the Model Validation Service (above), plus:
- Relying on your actual data and other inputs, EasCorp utilizes its own sophisticated analytical software, calculates Net Economic Value (NEV) and Net Interest Income across numerous scenarios, and compares the results side by side with your current model to identify important differences and their drivers.
- You are provided an in-depth written report of findings and recommendations in an easy to read narrative, and we consult on ways to improve your process by describing the impact of certain inputs, as well as alternative approaches to modeling complex financial instruments in order to improve the reliability of your reports. A draft report is presented initially for management’s review and comment, after which it is prepared and presented in final form.
- The Model Validation Plus Service is ideally suited for credit unions that license modeling software from outside parties and run this software “in house,” as well as institutions experiencing a management transition in areas that touch asset liability management.