Simplifying the Modeling Challenges in PPNR
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As a crucial part of capital planning, pre-provision net revenue (PPNR) modeling has been under the spotlight for careful review and scrutiny from the Federal Reserve Board (FRB) since 2012 for the annual Comprehensive Capital Assessment and Review (CCAR) submission.
This article looks at two of the challenging decisions bank holding companies commonly face when looking to develop and validate PPNR models--whether to choose a quantitative or a qualitative approach and the selection of variables.