+6. Types of environmental scenario analysis
---+6.1. Stress tests
------+41. Institutions should incorporate environmental factors into their stress testing framework …
------+42. In accordance with Article 177(2) and (2a) of Regulation (EU) No 575/2013, institutions using …
------+43. For the purposes of their stress testing exercise, institutions should use a baseline scenario …
------+44. When defining their baseline scenario, institutions should assume a continuation of current …
------+45. For the set of adverse scenarios, institutions should consider environmental shocks as shocks …
------+46. When incorporating environmental variables into their existing stress testing framework …
------+47. To facilitate a smooth integration of the environmental variables, institutions may need to …
------+48. Institutions should ensure that industry sector and country or geographical location dimensions …
------+49. Where possible and taking into account their materiality assessment, institutions should apply …
------+50. Institutions may use a constant balance sheet assumption, but are encouraged to incorporate, as …
------+51. Institutions should progressively incorporate environmental factors into their stress testing …
------+52. By way of derogation from paragraph 15 of the EBA Guidelines on institutions’ stress testing …
---+6.2. Resilience analysis
------+53. Institutions should build their resilience analysis with a view to assessing their capacity to …
------+54. As a starting point for resilience analysis, institutions should carry out a thorough analysis …
------+55. On this basis, institutions should set their own scenario of reference, i.e. the scenario which …
------+56. In addition to the reference scenario, institutions should also select a set of distinct …
------+57. When performing resilience analysis, institutions should consider the feedback loops stemming …
------+58. In parallel to this thorough analysis of their environment, institutions should identify key …
------+59. Combining this analysis of the sources of profitability of their business model and their …
------+60. Institutions should break down the analysis into several time horizons, while ensuring …
------+61. For resilience analysis, institutions should use a constrained dynamic portfolio assumption …
------+62. Resilience analysis should provide institutions with an assessment of the viability of their …
---+6.3. Ongoing monitoring and expert judgment
------+63. To enhance the robustness of their models, institutions should consider challenging their …
------+64. To address the residual shortcomings of their stress test models, institutions should consider …
------+65. More generally, institutions should use expert judgement when carrying out quantitative …
------+66. Institutions should ensure regular monitoring of significant developments in their environment …
------+67. Scenario analysis should be designed with adaptability and modularity in mind to allow for …

6. Types of environmental scenario analysis

6. Types of environmental scenario analysis

1. Overview

,
6.1. Stress tests

6.1. Stress tests
6.2. Resilience analysis

6.2. Resilience analysis
6.3. Ongoing monitoring and expert judgment

6.3. Ongoing monitoring and expert judgment

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA - Published by the European Banking Authority at https://www.eba.europa.eu/