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2.1. Types of Stress Tests

Effective from Nov 23 2011 - Nov 22 2011
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The nature of stress tests would depend on the objective(s) of conducting such tests. For the purposes of these Rules, the stress tests would either be conducted by the banks themselves or by SAMA, and would fall in any of the following categories: 
 
 i.Regular Stress Tests: Such stress tests would be conducted by the banks either at their own initiative as part of their risk management framework (in which case the nature and frequency of tests is determined by the banks themselves) or to meet the regulatory requirements of SAMA. Such Regular Stress Tests, to be conducted by banks on regular basis, are also called Bottom-up Stress Tests;
 
 ii.Ad-hoc Stress Tests: Such tests may be conducted by the banks at irregular intervals to assess the resilience of their overall portfolio or exposure to a specific business area in the backdrop of adverse market developments or abrupt changes in the external operating environment. SAMA may also require banks to conduct ad-hoc tests from time to time and report the results thereof to the Agency in the prescribed manner;
 
 iii.Reverse Stress Tests: Such tests may be conducted by the banks to identify the vulnerabilities and assess the resilience of their business plan. The nature of such tests is further elaborated under Section 5.4 of these Rules;
 
 iv.Macro Stress Tests: Such tests may be conducted by SAMA from time to time to assess the resilience of the Saudi Banking System to withstand adverse shocks. These tests are also called TopDown stress tests;