4th Annual
Best Practices For Stress Testing In Financial Institutions
December 5-7, 2022 | NYC
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One of the most valuable agenda contributors and keynote speakers in the GFMI's 4th Annual Best Practices For Stress Testing In Financial Institutions Conference, December 5-7 in NYC, Robert Linklater, Head of Enterprise Stress Testing at TD Bank, has provided us with his views on climate stress testing and agreed to be shared with our network.
In this exclusive interview, Robert elaborates on a sheer number of new factors to be incorporated in climate stress testing scenarios development, impacts of these factors on the operational aspect for relevant departments within financial organizations and finally areas of focus or investment to effectively address challenges associated with such factors.
Enjoy reading the interview!
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Climate Stress Testing, Development Scenarios and Data Sourcing:
An Interview with Robert Linklater - Head Enterprise Stress Testing at TD
1) What new factors are having to be incorporated into scenario development for climate stress testing?
Physical and Transitional Risk Climate Change Scenarios and the related approaches needed to project the impact of Climate Change are materially different than typical Macro Economic and Financial based scenarios. The projection periods for climate change analysis typically range from 5 to 50 years, in comparison to 2-3 three years for a typical Macro Economic Capital oriented stress test. In addition the scenario variables and parameters are very different. The Physical Risk scenarios explore the impacts of acute and/or chronic (persistent) physical climate changes such as flooding, drought, sea level rises, fire, or permanent change in temperature in specific geographical areas, beyond levels/events that have occurred in the past. This requires producing related employment, asset prices and other key factors at ZIP Code level granularity vs say an MSA level. Transitional Risks introduce completely new factors that have to be considered in projecting credit migration at the entity level resulting from the impacts of government policies ( Carbon tax, restrictions on sale, clean up costs), consumer demand, competition/substitution and price elasticity. These factors have to consider the corporations current business composition and contribution to climate and potential mitigations and changes to its business mix.
2) How does accounting for these new factors in your stress tests impact the operations of your institution?
The main changes include developing a wider range of scenario design capabilities and new projection capabilities and hiring or up-skilling staff to better understand the risks and projection of the related climate risks.
3) What areas of investment are you focusing on? Where, for example, are you planning to invest within next 3 to 6 months?
The primary investments are in sourcing internal and external climate and counterparty specific data to be used in the development of new modeling and projection capabilities . Hiring of new staff and up-skilling existing stress testing resources is required to build both capacity and develop appropriate climate specific capabilities. As well new aggregation and reporting capabilities specific to climate risk analysis will also be needed to be developed.
4) In terms of our platform, (our conferences are informal and intimate peer led meetings where all speakers and delegates are senior executives from top financial institutions), how do you see it assisting you with overcoming the challenges you currently face?
In addition, to formal industry forum, these industry conferences including the GMFI conferences, provide a great opportunity to informally discuss common challenges and compare notes on how others have solutioned or expect to solution.
Robert Linklater
Head Enterprise Stress Testing
TD Bank
Robert is a keynote speaker and a panellist at the GFMI's 4th Annual Best Practices For Stress Testing In Financial Institutions Conference, December 5-7 in NYC. Sessions:
December 5 | 11:15 AM - Panel Discussion:
Enhance communication across different departments to improve efficiency of stress testing
1. Discuss the importance of communication across departments when developing testing models
2. Where should you invest in developing idiosyncratic stress testing models?
3. Assess the importance of a one-size-fits-all approach to enhance accessibility
December 5 | 2:45 PM - Case Study:
Generate scenarios for unforeseen macro factors such as climate and geo-political risks
1. How do you define a scenario that hasn’t happened before?
2. Determine how to design a scenario including key features that should be used your risk appetite
3. How to decide what historical data/events and scenario features are still relevant to use within stress scenarios
4. Explore the best practices for blending historical data with predictions to create scenarios for the future
5. Overcome the challenge of increased time-horizons for climate stress tests to improve your modelling capabilities
Speaker Bio:
Robert Linklater Heads the Enterprise Stress Testing for TD Bank Group responsible for establishing Global Stress Testing Frameworks and Scenarios as well as aggregation and analytic capabilities to enable reporting of Enterprise Stress Tests results, observations and risk appetite monitoring to Senior Committees and the Board. Previously, he was responsible for the oversight of US CCAR Scenarios, oversight of Estimation Approaches used in stress testing and reporting consolidated US stress results to senior committees and the Boards of Directors. He previously also led TD Securities stress testing, trading book valuations, capital reporting and initiatives for the Wholesale Bank operations of TDBG. In addition, he was the CFO of various subsidiaries related to Private Equity and Asset Securitization.
Prior to TD Bank, Mr. Linklater held various positions at the Royal Bank of Canada including Head of Corporate Treasury Finance. He was responsible for enterprise derivative and hedge accounting and reporting, accounting and reporting of treasury related activities, including securitization. He had also held the position of Head, External Reporting at Royal Bank of Canada where he was responsible for the Annual and Quarterly Report to Shareholders and was involved in Corporate Social Responsibility Initiatives and Reporting. He also held senior management roles in Group Risk Management leading enterprise credit provisioning and Basel II initiatives.
Robert has experience in public accounting, with Coopers & Lybrand in Canada and the United Kingdom working primarily with financial institutions. He holds a Bachelor of Commerce degree in Finance from McGill University and a Masters of Business Administration from the University of Toronto.
Speakers at this Conference Include:
