94. Institutions should perform quantitative and more sophisticated analyses, taking into account …

Institutions should perform quantitative and more sophisticated analyses, taking into account the institution’s size as well as the nature, scale, complexity and riskiness of its business activities, in setting out specific loss levels or other negative impacts on its capital, liquidity (e.g. the access to funding, in particular to increases in funding costs) or overall financial position. Institutions should work backwards in a quantitative manner to identify the risk factors, and the required amplitude of changes, that could cause such a loss or negative impact (e.g. defining the appropriate loss level or some other measure of interest on the balance sheet of the financial institution such as capital ratios or funding resources). Institutions should understand and document in detail the drivers of risk (e.g. outputting the exact factor draws that had the most impact on the portfolio tail region), the key business lines and a clear and consistent narrative around weaknesses and the corresponding scenarios (e.g. about the underlying assumptions and sensitivity of the results to those assumptions over time) that cause the pre-defined outcomes and the events chain and the likely flow through (e.g. the most important factors may be mapped to macroeconomic variables according to the combinations for a given target loss/capital in a portfolio), identifying hidden vulnerabilities (e.g. hidden correlations and concentrations) and overlapping effects.

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/