15 June 2021, [London] – Global risk analytics consultancy, 4most, has announced the provision of its USA CECL Economics Service to BancorpSouth Bank amidst the ongoing pandemic. The partnership sees 4most supporting the Bank through the pandemic recovery period, while gauging new risks, as part of its range of credit risk initiatives.
The pandemic has caused volatility and uncertainty for many lenders and as the economy recovers 4most will provide invaluable insight and economic forecasting for the Bank’s CECL models and stress testing efforts. To better understand the changeable risk environment BancorpSouth has been working closely with 4most to undertake a tailored analysis of key risk drivers including, the labor market, wages and prices, household finances, financial variables and residential and commercial property prices.
While rapid short-term growth is a certainty, it is important to appreciate what might go wrong. With this in mind, 4most has developed an ‘overheating’ scenario for the Bank in which pre-crisis levels of output are regained in Q2, but a resurgence of inflation then depresses real incomes. During this unprecedented period of easy money and loose fiscal policy, this could be a catalyst for a reassessment of the value of riskier assets, such as property and equities, which could in turn, lead to another recession as we head into 2022.
Keith Church, Head of Economics at 4most explained: “BancorpSouth, like all Banks, is keen to understand the current risk environment and how that might change over the coming months as we emerge from the crisis. Our team are providing both reasoning and narrative to support forecasts, so that the bank can fully understand the immediate and emerging economic environment and be in a stronger position to assess threats and maximise opportunities.”
Speaking about the partnership, Ty Lambert, CRO at BancorpSouth added: “We’re delighted to be continuing our partnership with 4most. The team’s expertise and guidance in interpreting the economic downturn and recovery prospects during these challenging times, have been and are, of enormous value to BancorpSouth.”