Article 17
Assessment of the adequacy of the stress testing programme
1. When assessing the adequacy of the programme of stress testing referred to in Article 325bi(1), point (g), and Article 325bp(7), point (b), of Regulation (EU) No 575/2013, competent authorities shall verify whether:
|
(a) |
the institution reviews scenarios applied as part of the stress testing programme at least annually; |
|
(b) |
the risk control unit runs the stress test scenarios determined in the stress testing programme frequently and at least every month, and at a higher frequency where the institution has significant trading activities; |
|
(c) |
the scenarios to be applied as part of the stress testing programme comprise, apart from historically observed or hypothetical scenarios, scenarios resulting from reverse stress testing and ad-hoc scenarios designed to address the relevant specific risk drivers; |
|
(d) |
the scenarios referred to in point (c) are reviewed at least on an annual basis. |
2. Competent authorities shall verify whether the scenarios referred to in paragraph 1, point (c), are used to assess the reasonableness of the elements constituting the own funds requirements for market risk, including the additional own funds requirement for default risk, when those own funds requirements are compared with potential losses stemming from severe, but plausible market scenarios.
3. For the purposes of paragraph 2, competent authorities shall verify whether the institution, when it is assessing the reasonableness of the default risk model assumptions, in particular regarding the capture of credit risk concentrations, uses all of the following:
|
(a) |
losses arising from events, including credit events; |
|
(b) |
hypothetical rating downgrades; |
|
(c) |
market events on specific issuers’ types; |
|
(d) |
changes to copulas’ types and parameters, where modelled explicitly. |