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6.2. Levels of Shocks

Effective from Nov 23 2011 - Nov 22 2011
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Banks may use the following levels of shocks to the individual risk factors taking into account the historical as well as hypothetical movement in the underlying risk factors: 
 
 i.Mild Level Shocks: These represent small shocks to the risk factors, which may vary for different risk factors;
 
 ii.Moderate Level Shocks: These represent medium level shocks, the level of which may be defined for each risk factor separately;
 
 iii.Severe Level Shocks: These represent severe shocks to all the risk factors and their level may also be defined separately for each risk factor. Such scenarios may reflect an extreme economic downturn or severe market conditions;
 
Banks are required to invariably choose and apply the three levels of shocks listed at points (i) to (iii) above to each of the identified risk factors. Furthermore, they are also required to conduct Reverse Stress Testing in line with Para 5.4 of these Rules.