129. Competent authorities should review investment firms’ assessments of cyclical economic …

Competent authorities should review investment firms’ assessments of cyclical economic fluctuations, if relevant in the form of stress testing or sensitivity analyses, and their outcomes. Where, on the basis of such review, the investment firm’s assessments of the impacts of cyclical economic fluctuations are sufficiently reliable, the results of such review should inform the assessment of various SREP elements, in particular:

• a. the identification of possible deficiencies in overall governance arrangements or investment firm-wide controls identified during the review should be taken into account;
• b. the identification of relevant business vulnerabilities that should be taken into consideration when assessing investment firms’ business model viability and sustainability of their strategies in accordance with Title 4;
• c. the identification of possible vulnerabilities or weaknesses in risk management and controls on individual risk areas identified during the review should be taken into account by the competent authorities when assessing individual risks to capital as referred to in Title 6, or risks to liquidity as referred to in Title 8; and
• d. the potential determination of guidance on additional own funds (P2G), revised capital planning and other measures as set out in Titles 7 and 10.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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