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Research Update

A common metric for non-financial risks

In conjunction with the Durham University Business School, we are testing the inherent predictiveness of the RU… a common, additive metric designed to express all forms of non-financial risk (NFR). For more information on the RU, click here.

 Our test involves restating publicly available bank holding company financial (GAAP) data into Inherent RUs (IRUs) and examining the correlations between trended IRUs and net income before tax (NIBT). Positively correlated upward trends in IRUs and related material unexpected losses would indicate the RU possesses inherently predictive properties.

 Our test covered the period leading up to and immediately following the global financial crisis of 2007/8.

 We have reproduced below NFR Analyses in Tableau for 15 sample US banks:

  • Bank of America
  • BB&T Corporation
  • Capital One Financial Services
  • Citigroup
  • Fifth Third Bancorp
  • Huntington Bancshares
  • JPMorgan Chase
  • Keycorp
  • M&T Bank Corporation
  • Northern Trust Corporation
  • PNC Financial Services
  • Regions Financial Corporation
  • State Street Corporation
  • Suntrust Banks
  • Wells Fargo & Co

 We welcome your review and feedback. Please email risk.research@serraq.org with your thoughts and suggestions.

 Note: Before accessing the NFR Analyses, please read the disclaimer below.

Non-Financial Risk Exposures Can be Expressed in Figures

How much non-financial risk (NFR) did your bank generate through the financial crisis? To find out, we’ve displayed a sample report at the bottom of this page; clear the search box, enter the name of your bank and follow the directions below.

Before proceeding, all users of the NFR Analysis must read the applicable disclaimer.

 

Directions: How to Use the NFR Analysis

  • Enter the name of your bank in the ‘Bank’ search box at the right of the chart (US regulated banks only).
  • In the dropdown box, select the entity or entities you want to analyze.
  • Clear the search box before initiating a new search.
  • Trended NIBT ($) is plotted via the blue line and NFR (RU) via the red line: the RU is a new, additive metric designed to express all forms of NFR (click herefor more information on the RU).

 

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Important Notes

  • If your bank is regulated in the US but is not included in the above sample and you would like to receive an NFR Analysis, pleasecontact us.
  • If your bank is not regulated in the USA but you would like to discuss how an NFR Analysis could be produced for your bank, please contact us.
  • The NFR Analysis only reports inherent NFR (Inherent RUs). For information on how to calculate residual NFR (Residual RUs) for your bank please contact us.
  • The analysis is produced from bank holding company call-report (US GAAP) data (FR Y-9C)made publicly available by the Federal Reserve Bank of Chicago. Click here for more information.
  • For notes on how an NFR Analysis test data file was prepared from the FR Y-9C dataset, find below a brief description of the process.
  • All users of the NFR Analysis must read the applicable disclaimer.

Future Plans

We are working on extending the NFR Analysis up to the present date as well as new reports focused on products and NFR types. If you are interested in accessing these reports when available, please contact us.

About SERRAQ and Membership

To learn more about SERRAQ, click here. For information on how to apply for membership of SERRAQ and details of the benefits of becoming a member, click here.

Disclaimer

The information provided through the NFR Analysis discussed on this web page is produced from US bank holding company call-report (US GAAP) data made publicly available by the Federal Reserve Bank of Chicago. Accordingly, SERRAQ cannot guarantee the accuracy or completeness of this data. Further, we used certain assumptions to compensate for the inability to validate, with the banks concerned, the risk factors used in the NFR/RU calculation engine (primarily Exposure Uncertainty Factors [EUFs] and Value band Weightings – [VBWs]). Accordingly, SERRAQ cautions users of the NFR Analysis that it constitutes indicative information only and SERRAQ does not guarantee, and accepts no legal liability, for its accuracy, reliability, or completeness.

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