SAMA will assess the effectiveness of the banks’ stress testing programs as part of its supervisory review process and during bilateral meetings on their ICAAP documents. SAMA may also review the stress testing frameworks of banks during their on-site examinations. In conducting such a review, SAMA shall assess the efforts made by banks in embedding the requirements of these Rules into their risk management frameworks. Furthermore, the review may also cover the following aspects of the banks’ stress testing programs:
i.
The nature and complexity of business activities and the overall risk profile of the bank;
ii.
Evaluation of the organizational structure and resources deployed for conducting stress tests;
iii.
The adequacy of stress scenarios and methodologies adopted by the bank for its stress testing program;
iv.
The relevance and appropriateness of the assumptions made for stress testing;
v.
The adequacy of the frequency and timing of stress testing to support timely remedial actions;
vi.
The effectiveness of the policy, procedures and processes for conducting stress tests, compiling results and making use of the findings thereof;
vii.
The level of involvement of the board and the senior management in the stress testing program;
viii.
Assessment of the degree of compliance with these Rules;
ix.
Any other matters related to stress testing program and risk management framework of the bank.
SAMA would determine the timing and frequency of conducting stress testing reviews for individual banks keeping in view the progress made in implementation of these Rules and the robustness of stress testing program of each bank.
