The banking sector serves as a crucial cogwheel. It facilitates the flow of money in the economy and performs important functions for society through many services, such as the safeguarding of customer deposits, the provision of credit, payment processing, asset management, market-making and proprietary trading.
The risk management principles embodied in traditional actuarial work have broad applicability in the management of banking products (which tend to have a shorter risk horizon than traditional insurance and pension products). Actuarial skills may be applied to:
- quantifying credit risk parameters for credit loss allowances and risk-weighted assets;
- liquidity, interest rate risk and capital management within bank treasury functions;
- customer credit risk scoring, segmentation and risk-based pricing of banking products; and
- enterprise-wide stress testing and capital adequacy assessments.
While there are many professions that contribute to the banking sector, actuaries possess a unique skill set and expertise in risk management that are tailored to meet the needs of an evolving professional landscape.
Actuarial Techniques in Risk Pricing and Cash Flow Analysis for U.K. Bank Loans. Journal of Actuarial Practice, 1998.
Research that compares cash flow model based on actuarial principles to traditional pricing methods usually employed in bank lending.
Modeling Loss Given Default. Federal Deposit Insurance Corporation, 2018.
Research that investigates various loss given default statistical models’ performance with respect to predictive accuracy.
Practical Application Examples for the Bank Webinar. IAA Banking Working Group, 2017.
Overview of the key risks encountered in banking along with an introduction to credit loss modeling.
IFRS 9 Financial Instruments and Disclosures. OSFI, 2016.
OSFI guidance to Federally Regulated Entities on the application of IFRS 9.
Capital Adequacy Requirements 2023. OSFI, 2023.
Canadian banking regulatory capital framework.
Basel III: International Regulatory Framework for Banks. Basel Committee on Banking Supervision, 2019.
The Basel III Standard is an internationally agreed set of measures designed to strengthen regulation, supervision and risk management of banks.
Opportunities for Applying Actuarial Techniques in Banking. IAA, 2021
This paper discusses opportunities for the application of actuarial techniques in banking practice for actuaries.
The Banking Industry and Actuaries: Closing the Gaps. Francis Truong, ACIA and Renée Couture, FCIA, 2021.
With traditional banking models under increasing threat, the demand for actuarial expertise is growing. Many actuaries have the analytical know-how to be successful in banking – what often lacks is the support and public awareness to get there.
Banking Specialist International Handbook. Actuarial Society of South Africa, 2020. (Sign-up and Purchase Required)
Summary notes for banking actuaries and professionals based on tuition material from the banking fellowship examination offered by the ASSA.
How Actuaries are Innovating in the Banking Sector. IAA Banking Working Group, 2017.
Presentation by the IAA that explores how actuaries innovate in the South African banking sector.
Case Studies for the IAA Banking Webinar. IAA Banking Working Group, 2017.
Case studies on how actuaries could add value in the banking sector.
Actuaries in Banking. The Actuary, 2017.
Interviews of various actuaries currently practicing in banking.