FSA INTRODUCES NEW STRESS TESTING RULES
11 December 2009 @ 12.37pm BST
The Financial Service Authority today said that it had strengthened its stress testing regime. The regulator said that it would now require companies to improve their stress testing capability and enhance their capital planning stress testing. The FSA added that it would introduce new stress testing requirements for companies.
The FSA said that the new requirements consisted of three main elements, the first of which was the requirement of firms to develop and enforce their own stress testing programme to assess their ability to meet capital and liquidity requirements in stressed conditions.
The FSA said it would also conduct its own stress tests on companies as part of a “more intrusive” approach. Larger “high impact” firms can expect regular tests, while smaller ones will be tested only when “the need arises”.
A system-wide stress test will also be introduced by firms using a common scenario to analyse financial stability as a whole.
Paul Sharma, FSA Director of Prudential Policy, said, “Stress and scenario testing should be an important element in firms’ planning and risk management processes. These changes send a clear signal to firm’s senior management that they need to engage in building a robust stress testing infrastructure as an important part of effective risk management, and use that to assess capital needs in a stress.
“Reverse stress testing is a separate, but complementary exercise. It is essential that firms identify what could cause their business to fail and use this information to ensure that the relevant risks are sufficiently well-understood and appropriately managed to secure consumer protection and market confidence.
Join our Stress Testing Master Class
April 14th & 15th, 2010
London, UK
http://nuparc.com/divlearn/executive-training-stress-testing/
Article is copyrighted by IBTimes and found here
http://www.ibtimes.com/#
