11 Stress Testing Asian Banker Summit 2011 Charles Richard – Cofounder QRM Chicago | London | Singapore

22 Stress Tests are not limited by History, only by your imagination They can cover a wide range of possible scenarios and can be based on multiple market and economic factors Interest rate, exchange rate, credit spreads, economic drivers They can be used in conjunction with new volume, runoff and reinvestment strategies that are consistent with management’s vision for the organization They can be used in conjunction with quantitative behavioral and correlation models to provide the best of both worlds The results can be used to manage the risk and enhance the profitability, not just satisfy the regulators Stress Testing QRM Proprietary and Confidential © 2011

33 Stress Tests Scenarios Losses and Prepayments Total Exposure and RWA-Baseline Scenario Net Income and Tier 1 Capital New Volume by Credit Score Losses in SCAP Scenarios Capital Ratio Under SCAP Scenarios The US Government Stress Test QRM Proprietary and Confidential © 2011

44 Stress Test Scenarios QRM Proprietary and Confidential © 2011

55 Losses and Prepayments Under SCAP Scenarios QRM Proprietary and Confidential © 2011

66 Total Exposure and Risk Weighted Assets Baseline Scenario QRM Proprietary and Confidential © 2007

77 Net Income and Tier 1 Capital QRM Proprietary and Confidential © 2011

88 New Volume Income by Credit Score QRM Proprietary and Confidential © % of the income is being generated by mid-low tier credit quality obligors, which increases the risk

99 Losses in SCAP Scenarios QRM Proprietary and Confidential © 2011

10 Capital Ratio Under SCAP Scenarios QRM Proprietary and Confidential © 2011 Actual growth strategy is critical and in this example will result in increased capital needs

11 If you would like a copy of the QRM’s Government Stress test case study or any additional information please contact: or Thank you for your attention Please enjoy the Asian Bankers Summit! Additional QRM information QRM Proprietary and Confidential © 2011

12 World Headquarters: 181 West Madison Street, 41st Floor Chicago, IL (312) London Office: 288 Bishopsgate Suite 1.04 London, EC2M 4QP +44 (0) Singapore Office: 80 Raffles Place, #36-08 UOB Plaza 1 Singapore QRM Proprietary and Confidential © 2007