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Effective from Aug 31 2021 - Aug 30 2021 To view other versions open the versions tab on the right
Banks should conduct a comprehensive, robust stress-testing that is consistent with SAMA Stress-testing Rules, taking into consideration the following:
i.
The impact of a range of severe but plausible stress scenarios on the bank’s cash flows, liquidity resources, profitability, solvency, asset encumbrance and survival horizon.
ii.
Selecting stress scenarios that reveal the vulnerabilities of the bank’s funding. In addition to performing a tailored and in-depth review of the bank’s vulnerabilities, capturing all material risks on an institution-wide basis that result from the bank’s business model and operating environment in the context of stressed macroeconomic and financial conditions. The review should be conducted on a yearly basis and more frequently, when necessary, depending on individual circumstances. On the basis of this review, the bank is required to define an adequate stress-testing programme for both normative and economic perspectives. As part of the stress-testing programme, the bank is required to determine adverse scenarios to be used under both perspectives, taking into account other stress-tests it conducts.
iii.
Conducting reverse stress-testing in a proportionate manner.
iv.
Continuously monitoring and identifying new threats, vulnerabilities and changes in its environment to assess whether its stress-testing scenarios remain appropriate and, if not, adapt them to the new circumstances.
v.
Regularly updating the impact of the scenarios. In the case of material changes, the bank should assess its potential impact on its liquidity adequacy.
The degree of conservatism of the stress-testing scenarios adopted and assumptions made by the bank should be discussed in the ILAAP document.
