Modelling Pre-Provision Net Revenue (PPNR)

Banks need to understand how their profitability can be affected under various economic scenarios. Stress testing is a common approach to measure potential losses that might rise in an economic downturn. Less well known is Pre-Provision Net Revenue (PPNR) modelling, which is concerned with how variable bank earnings are, and how these could be affected in an economic downturn.  However, banks face a number of challenges in modelling PPNR.

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