Often CCAR and CECL purpose models are grouped together, and they have to do with models designed to satisfy regulatory and accounting standards required for banks. Here I briefly describe their differences.

CCAR is a US regulatory standard that requires banks to conduct stress tests under the scenarios that the Fed provide. These scenarios have 9 quarters of duration. The stress tests show whether the bank has sufficient capital reserve under the scenarios.

CECL is an international accounting standard that requires banks to calculate expected lifetime loss of loans and set aside appropriate reserves.

For both exercises, credit risk models and economic scenario forecasting models are used, as these work together to provide estimates of losses.