20. The institution’s stress testing programme should be appropriately documented for all types of …

The institution’s stress testing programme should be appropriately documented for all types of stress tests carried out at the single risk type and/or portfolio level, as well as the firm-wide level. Documentation should cover at least:

• a) the stress testing approach;
• b) the possible interlinkages between solvency stress tests and liquidity stress tests, namely a mapping between the deterioration on capital position (solvency) and ability to issue commercial paper and bonds (liquidity), macro-driven probabilities of default shifts (solvency) and the implied rating migration of banks unencumbered assets and the effect on collateral deposited at the relevant central bank (liquidity), the increase in expected non-performing loans (solvency) and the reduction in expected inflows from loan repayments or from non-financial corporation bonds (liquidity), or a possible liquidity gap (liquidity) and asset fire sales (solvency), and an increase in funding costs (liquidity) and P&L effects (solvency);
• c) the roles and responsibilities as determined in the internal policy, specifying the roles for the second and third lines of defence, and processes for at least the performance of the stress testing programme;
• d) a description of the entire process of designing, approving, performing, monitoring the performance and periodically assessing the stress testing programme and its outcomes;
• e) a description of the processes for evaluating stress test outcomes, including details of areas that require manual or human judgemental in some parts, and also of the process for using the results for informing management actions and the strategy of the institution; and
• f) a description and inventory of the relevant IT applications used for stress testing (and where a central inventory exists, reference can be made to it).

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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