As part of the comprehensive capital analysis and review (CCAR) process, banks are required to maintain both champion and challenger models for stress testing.
Bank managers, likewise, should favor a competitive modeling framework, with the champion model being that which delivers the most strategic insight and the most accurate portfolio projections at the lowest possible cost.
Most banks, however, are choosing not to adopt a competitive stress test modeling structure. Instead, the standard process seems to be that banks will arbitrarily nominate, in advance, a certain model development initiative labeled the “champion” and a separate, more poorly funded and resourced project known as the “challenger.”
