• LM-9.1 LM-9.1 Overview

    • LM-9.1.1

      In addition to conducting cash flow projections to monitor its liquidity positions under normal business conditions, a bank must regularly perform stress tests based on sufficiently severe but plausible scenarios to identify potential sources of liquidity strain under stressed conditions.

      August 2018

    • LM-9.1.2

      Banks must conduct stress tests based on sufficiently severe, but plausible scenarios and assumptions that are commensurate with the bank's business nature, size and complexity. The stress testing scenarios and assumptions adopted by a bank must reflect the current market conditions and address the bank's actual experiences in stressed situations. Such scenarios and assumptions must be reviewed regularly by the senior management, with any major changes endorsed by the bank's Board or its relevant delegated committee(s). The active involvement of senior management is vital to the stress testing process. During their regular reviews, senior management must consistently require consideration of sufficiently severe stress scenarios.

      August 2018

    • LM-9.1.3

      Stress tests must enable a bank to analyse the impact of stress scenarios on its consolidated group-wide liquidity position, as well as on the liquidity position of individual entities and business lines in order to understand where risks could arise. For the purposes of consolidated liquidity positions, the licensees may use a proportionate or component approach.

      August 2018

    • LM-9.1.4

      Stress tests must be performed for all significant currencies in aggregate and, separately, for positions in BHD or USD in wholesale banks functioning on the basis of a US Dollar based operating model, if relevant, and individual foreign currencies in which banks have significant positions.

      August 2018

    • LM-9.1.5

      The design and frequency of stress testing must be commensurate with the size and complexity of a bank and its liquidity risk exposures.

      August 2018

    • LM-9.1.6

      When conducting stress tests on their liquidity position, banks must also consider the insights and results of stress tests performed for other risks, including possible interaction with these other risks.

      August 2018