Featured Product

    BCBS Issues Final Stress Testing Principles for Banks

    October 17, 2018

    BCBS issued the final, revised version of its stress testing principles for banks and supervisory and other relevant financial authorities in Basel Committee member jurisdictions. These principles have been finalized following a consultation in December 2017 and they replace the Principles for sound stress testing practices and supervision, which the Basel Committee had published in 2009.

    The principles have been updated to reflect that stress testing is now both a critical element of risk management for banks and a core tool for banking supervisors and macro-prudential authorities. The updated principles are set at a high level so that they can be applied across banks and jurisdictions, remain relevant as stress testing practices evolve over time, and be used by jurisdictions to guide all elements of a sound stress testing framework. The principles are guidelines that cover the objectives, governance, policies, processes, methodology, resources, and documentation to guide stress testing activities and facilitate the use, implementation, and oversight of stress testing frameworks.

    Each principle is followed by a short description of considerations that are equally relevant for banks and authorities. This description is followed by additional points applicable to either banks or authorities, as follows: 

    • Additional points for banks—points with relevance to (a) banks' own internal stress testing activities and (b) their participation in bank-run supervisory stress tests. 
    • Additional points for authorities—points with  relevance to (a) supervisor-run stress tests and (b) the authorities' role in bank-run supervisory stress tests. They also cover the role of authorities in their oversight of internal stress testing activities of banks. 

    These principles have been formulated with a view toward application to large, internationally active banks and to supervisory and other relevant financial authorities in Basel Committee member jurisdictions; however, smaller banks and authorities in all jurisdictions can benefit from considering the potential impact of adverse scenarios on their business, even if they are not using a formal stress testing framework but are instead using simpler methods. These principles are, therefore, intended to be applied on a proportionate basis, depending on the size, complexity, and risk profile of the bank or banking sector for which an authority is responsible.

     

    Related Links

    Keywords: International, Banking, Stress Testing, Principles, Macro-prudential Framework, Systemic Risk, Proportionality, BCBS

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    News

    HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26

    HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6821