92. Institutions using internal models for credit risk, counterparty credit risk and market risk …

Institutions using internal models for credit risk, counterparty credit risk and market risk, when carrying out reverse stress testing in accordance with Articles 177, 290(8) and 368(1)(g) of Regulation (EU) No 575/2013, should endeavour to identify severe, but plausible, scenarios that could result in significant adverse outcomes and potentially challenge an institution’s overall viability. Institutions should see these reverse stress tests as an essential complement to their internal models for calculating capital requirements and as a regular risk management tool for revealing the possible inadequacies of these internal models. In severe stress scenarios, even though this should not necessarily be taken as an indication that the modelling of the inputs into the IRB formula are inadequate, model risk will increase and may lead to a breakdown in the model’s predictability.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

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