More than 50 actuaries from actuarial organizations around the world recently gathered with bankers in Washington for a day-long seminar focused on the evolution of analytics and risk management in banking. Attendees learned how the actuarial skill set aligns with the talent needs in the banking sector.
“Advanced analytics and modeling 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 Practices at McKinsey. Helbekkmo kicked off the day describing the most important issues facing banks today, such as credit risk analytics, fraud management, and model risk management and validation. This set the stage for a deeper dive into these and other issues over eight sessions.
Scott Hallworth, FCAS, chief data, model & analytics officer for 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 modeling and analytics. “The continued evolution and adoption of advanced analytics in banking involves the input of our greatest asset — people,” said 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 modeling and risk management being done in banks.”
Jennifer Chancey, ASA, treasury analyst for United Bank, discussed the recent regulatory emphasis on stress testing and capital modeling and its implications for banks and their models. Chancey gave an overview of an effective bank stress-testing framework in comparison to similar frameworks for insurance companies.
Erik von Schilling, FSA, FCIA, SVP balance sheet management for Canadian Imperial Bank of Commerce (CIBC), spoke on post-global financial crisis regulation such as formal liquidity requirements. He explained how these constraints are managed and optimized through treasury risk management, funding programs, and business transfer pricing.
“Our actuarial standards of practice and robust continuing education programs allow actuaries to build models and ask the right questions in that process . . .”
— Brian Brown, FCAS
Other sessions discussed machine learning and artificial intelligence in banking, credit risk management, the U.S. banking regulatory environment, and the talent gaps banks are dealing with today. The seminar concluded with a capstone by Brian Brown, FCAS, principal and consulting actuary for 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. He outlined how regulators are interested in the model validation process in banks, and the resources that the actuarial profession can bring to bear 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, such as ‘Have we captured the tail risk?’ and ‘How sensitive is the model to changes in assumptions?’” explained Brown.
Presentations from the sessions are available through the seminar’s webpage at casact.org/education/banking/2019/index.cfm?fa=sessions.
The seminar was a collaboration among the Casualty Actuarial Society, Society of Actuaries, Canadian Institute of Actuaries, and the Actuarial Society of South Africa. The organizations expect to continue with joint efforts to open doors for actuaries in non-traditional areas where the actuarial skill set is valuable.
