Pandemic Analysis and Scenario Simulation

Our tool for detailed simulation of the impact of COVID-19 on capital ratios

The simulation of the COVID-19 impacts on regulatory capital ratios will be one of the most significant challenges in the next weeks for many banks. Both board members and supervisors are keen on understanding how the crisis will affect the capital ratios over the next three years.

Our expertise to help you manage the impact of the COVID-19 crisis

PwC can support banks through the uncertain times of COVID-19 by offering them the following services:

Develop and perform impact analysis of the COVID-19 crisis on regulatory capital ratios
Provide efficient support in implementing suitable and sustainable simulation solutions
Bring a team of experts, the entire PwC network and extensive experience in economic and financial crisis situations
Share valuable benchmarks and instant updates based on existing data and macroeconomic predictions from judgmental expertise

Providing you with guidance through uncertain times

Going concern ensured

Transparency about COVID-19’s expected impact on key indicators such as provisions, RWA, P&L and capital
Granular data base within allows breakdowns necessary for management
Takes into account support measures such as memorandums and guarantee schemes as well as bank management actions

Regulatory compliance ensured

Ensure compliance with capital requirements during a macroeconomic downturn caused by COVID-19
Ensure requirements for capital planning and stress testing are fulfilled
Communicate with stakeholders, such as supervisors, rating agencies and investors, using a reliable data base

Capital management ensured

Identify vulnerabilities by country, sector, counterparty, line of business, product type
Take the appropriate measures and simulate their impact using all available data rather than relying on simplifications
Management decisions on portfolio measures supported by detailed information on the likely impact of COVID-19

Overview of the method

The simulation tool uses a standardised three-step approach that can be individually adapted to the particular needs of banks at any time:

Step 1: data input

Scenarios will be translated into risk parameters and the flexible tool can process granular data from banks

Step 2: simulation

Based on the macroeconomic assumptions and adjusted risk parameters, the 'R'-based tool focuses on profitability and regulatory impacts of the COVID-19 crisis