BoE Report on Evaluation of Approach to Concurrent Stress Testing
BoE published a report on the evaluation, by the Independent Evaluation Office (IEO), of the effectiveness of the approach of BoE to concurrent stress testing. Also published is the response of BoE to this evaluation. The IEO report finds that the approach is successfully delivering on its principal objective and recommends a number of ways that the stress tests could be improved further. IEO has set out ten recommendations around three main themes. The evaluation was primarily conducted between June 2018 and January 2019.
The recommendations of the IEO fall under three themes. The first paves the way for more value to be extracted from this resource-intensive exercise, through suggestions to advance macro- and micro-prudential objectives. The second theme provides insights to guide BoE in enhancing delivery further by building efficiency and effectiveness. The final theme reflects on the challenges associated with communicating the stress test outcomes. It makes recommendations for ensuring that internal, public, and bilateral firm communications all support stress testing objectives to the fullest extent possible.
The report shows that concurrent stress testing is delivering value to policymakers, participating firms, and the industry more broadly. It serves both Financial Policy Committee (FPC) and Prudential Regulatory Committee (PRC) needs by providing insights into risks affecting the system and a common and comprehensive scenario to compare firms against one another. This allows policy making to be well- integrated and well-evidenced, which in turn supports significant credibility and accountability benefits. The openness of the exercise has proven to be particularly useful recently, as the tests have allowed BoE to communicate its view of the resilience of the banking system under various Brexit scenarios. However, the stress-testing framework is still maturing and, in this context, the IEO has seen some opportunities for refinement.
BoE is committed to implementing all of the recommendations by IEO. The BoE response to these recommendations details how BoE will respond to most of these recommendations. A small number of recommendations will require further work and BoE will report on these later in the year, as part of an update to its "approach to stress testing" document. The Annex to the BoE response summarizes the actions proposed by BoE. In February 2018, BoE's Court of Directors commissioned the IEO to conduct an evaluation of the effectiveness of BoE's approach to concurrent stress testing. The Court considered that an IEO evaluation at this juncture was appropriate, particularly as BoE was planning to review and update its approach to stress testing in 2019.
Related Links
Keywords: Europe, UK, Banking, Stress Testing, Concurrent Stress Testing, Recommendations, Brexit, IEO, BoE
Previous Article
BCB Communicates on Supervision of Open Banking ActivitiesRelated Articles
|
News
EBA Report Assesses Regulatory Framework for Fintech ActivitiesEBA published the findings of its analysis on the regulatory framework applicable to fintech firms when accessing the market.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Revises Capital Requirements for Operational Risk for BanksOSFI is revising its capital requirements for operational risk, in line with the final Basel III revisions published by BCBS in December 2017.
July 18, 2019
WebPage
Regulatory News
|
|
News
OSFI Consults on Revised Principles for Management of Liquidity RiskOSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk.
July 18, 2019
WebPage
Regulatory News
|
|
News
ESMA Guidance on Disclosures for Credit Rating Sustainability IssuesESMA published the technical advice on sustainability considerations in the credit rating market, along with the final guidelines on disclosure requirements applicable to credit ratings.
July 18, 2019
WebPage
Regulatory News
|
|
News
FASB Issues Q&A on Estimation of Expected Credit Losses by FirmsFASB issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked questions related to the Accounting Standards Update No. 2016-13 titled “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
July 17, 2019
WebPage
Regulatory News
|
|
News
US Agencies Delay Enforcing Volcker Rule Restrictions on Foreign FundsUS Agencies (FDIC, FED, and OCC) announced that they will not take action related to restrictions under the Volcker Rule for certain foreign funds for an additional two years.
July 17, 2019
WebPage
Regulatory News
|
|
News
SRB Announces SRF Receives Cash Injection, Grows to EUR 33 billionSRB announced that the Single Resolution Fund (SRF or the Fund) received a cash injection of EUR 7.8 billion from 3,186 institutions in 2019, bringing the total amount in the Fund to about EUR 33 billion.
July 17, 2019
WebPage
Regulatory News
|
|
News
FASB to Propose to Delay CECL Compliance Deadline for Certain EntitiesFASB published a summary of the tentative decisions taken at its Board meeting in July 2019.
July 17, 2019
WebPage
Regulatory News
|
|
News
IMF Publishes Report on 2019 Article IV Consultation with VietnamIMF published its staff report in context of the 2019 Article IV consultation with Vietnam.
July 16, 2019
WebPage
Regulatory News
|
|
News
European Parliament Elects Next President of European CommissionEuropean Parliament elected Ursula von der Leyen from Germany as the first female President of the next European Commission for a five-year term from November 01, 2019.
July 16, 2019
WebPage
Regulatory News
|
