Annexure-I
Name of the Bank: ------------------------- Stress Testing Results: Half-yearly Reporting to SAMA As of 30 June / 31 December ----------- I. Stress testing Framework
Salient features of the stress testing framework adopted by the bank should be described in this section. This would include, inter alia, a description of the organizational structure for conducting stress tests, composition of the stress testing team and their responsibilities, nature and frequency of stress tests, coverage of the portfolio, etc.
II. Stress Testing Methodologies
A description of the methodologies and techniques used for conducting stress tests should be provided in this section. This should be done in the light of guidance provided under Section 5 of the Rules.
III. Scenarios and Assumptions
A description of the stress testing scenarios and the underlying assumptions made by the bank for conducting stress tests should be provided in this section. This should be done, inter alia, in the light of guidance provided under Section 6 of the Rules.
IV. Risk Factors
The major risk factors identified by the bank based on the assessment of its portfolio and the inherent vulnerabilities should be described in this section. It may also be elaborated as to why the identified risks are considered relevant for the bank and why the other significant risks generally faced by banks are not considered relevant by the bank. This should be done, inter alia, in the light of guidance provided under Section 6 & 7 of the Rules.
V. Stress Testing Results
A summary of the results of stress tests should be provided in this section. This would include, inter alia, the following:
i. Listing of the levels of shocks used and the magnitude of shock applied for each level. This should be provided separately for each of the stressed risk factored;
ii. The estimated impact of the stress testing results on asset quality, liquidity, profitability and capital of the bank. The impact may be estimated based on the financial statements of the relevant reporting date i.e. as of 30th June or 31st December, based on which the half- yearly report would be submitted to SAMA;
iii. The results should contain both absolute amounts and key financial ratios e.g. NPLs to loans, liquid assets to liabilities, statutory liquidity ratio, return on assets, capital to risk weighted assets, etc. The results should provide both pre-stressed as well as stressed positions. They should also be in line with the regulatory requirements of SAMA;
iv. Listing of any violation of the SAMA’s regulatory ratios or any other requirements based on the stressed positions;
v. Any other information based on the stress testing results which the bank considers significant and would like to share with SAMA.
VI. Communication of Results
A confirmation to the effect that the results of the stress tests have been communicated to the board of directors, relevant board and management committees, senior management, and relevant business areas of the bank should be provided.
VII. Remedial Actions
Remedial action(s), if any, already taken by the bank to address potential risks and vulnerabilities identified by the stress testing results may be described in this section. Any planned remedial action(s) along with the expected timeline for their completion may also be described.