4.1. Approach to Stress Testing

No: 60697.BCS. 28747

Date(g): 23/11/2011 | Date(h): 27/12/1432

Status: In-Force

i.	Banks must adopt a holistic approach to stress testing, which means that all material risks (whether internal or external) to which the bank is or can be exposed to, should be covered in the stress testing process;
ii.	The magnitude of the shock should be large enough to stress exposure of the bank to various risks;
iii.	Banks should aim to capture all exceptional but plausible events in the scenario selection process;
iv.	The stress tests should take into account the recent developments in domestic, regional and global financial markets as well as all other relevant developments;
v.	The time horizon for capturing historical events for stress testing should be long enough to cover a period relevant to the portfolio of the bank;