This article originally appeared in the CIA (e)Bulletin.
by Mike Boa
In May 2019, more than 50 actuaries from actuarial organizations around the world gathered with bankers in Washington, D.C. for a day-long seminar focused on the evolution of analytics and risk management in banking and how the actuarial skill set aligns with the talent needs in the banking sector.
“Advanced analytics and modelling have tremendous potential to help banks add value through better decisions, risk reduction, and risk/return management,” explained the seminar’s keynote speaker, Hans Helbekkmo, Partner, Risk Practice at McKinsey.
Mr. Helbekkmo kicked off the day describing the most important issues currently facing banks, such as credit risk analytics, fraud management, and model risk management and validation. This set the stage for subsequent speakers to take a deeper dive into these and other issues over eight sessions.
Session highlights: advanced modelling and analytics
Scott Hallworth, Chief Data, Model & Analytics Officer, Federal National Mortgage Association (FNMA, or “Fannie Mae”) and formerly of Capital One, described his successful transition from chief actuary of a major insurance company to a cutting-edge bank known for its drive for advanced modelling and analytics.
“The continued evolution and adoption of advanced analytics in banking involves the input of our greatest asset – people,” said Mr. Hallworth. “Actuaries’ deep understanding of the math behind the analysis, combined with our keen business sense and problem-solving abilities, make us well-suited to handle the modelling and risk management being done in banks.”
Session highlights: stress testing and capital modelling
Jennifer Chancey, Treasury Analyst at United Bank, discussed the implications for banks and their models of the recent regulatory emphasis on stress testing and capital modelling, and provided an overview of an effective bank stress-testing framework in comparison to similar frameworks for insurance companies.
Session highlights: post-global financial crisis regulation
Erik von Schilling, Senior Vice-President, Balance Sheet Management, at the Canadian Imperial Bank of Commerce (CIBC), provided an overview of post-global financial crisis regulation such as formal liquidity requirements, and how these constraints are managed and optimized through treasury risk management, funding programs, and business transfer pricing.
Session presentations available online
Speakers at other sessions discussed machine learning and artificial intelligence (AI) in banking, credit risk management, the US banking regulatory environment, and the talent gaps banks are dealing with today. The seminar concluded with a keynote address by Brian Brown, Principal and Consulting Actuary, Milliman, who shared his thoughts on how actuarial education and training prepare actuaries to model complex risks, whether the risks are those faced by insurance companies or banks.
Mr. Brown outlined how regulators are interested in the model validation process in banks, and the resources that the actuarial profession can bring in this area. “Our actuarial standards of practice and robust continuing education programs allow actuaries to build models and ask the right questions in that process,” he explained, “such as have we captured the tail risk and how sensitive is the model to changes in assumptions?”
Presentations from the sessions are available through the seminar’s web page.
The content was well-received by the attendees, whose evaluations gave high marks for all the sessions. “Excellent day, with great content, speakers, and audience participation,” said one attendee.
The seminar was a collaboration among four actuarial organizations: the Casualty Actuarial Society, Society of Actuaries, CIA, and the Actuarial Society of South Africa. The organizations plan to continue with joint efforts to open doors for actuaries in non-traditional areas where the actuarial skill set is valuable.
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Mike Boa is Chief Communications Officer at the Casualty Actuarial Society. He wrote this article on behalf of the joint organizing committee.
This article reflects the opinion of the author and does not represent an official statement of the CIA.