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ST-1.4.1

Conventional bank licensees must establish comprehensive policies and procedures governing its stress testing programme which address the following:

(a) Principal objectives of the stress testing programme;
(b) Governance including the roles and responsibilities of the Board, senior management, relevant business heads, Risk Management, Operations, Financial Control, Treasury, Compliance and Internal Audit;
(c) Articulate the risk drivers (external and internal) in testing scenarios;
(d) Pre-defined frequency for periodic stress testing. In case of ad hoc stress testing, establish criteria or trigger points.
(e) Methodologies used for stress testing of each risk category and development of relevant scenarios;
(f) Range of triggers and remedial management actions envisaged vis-à-vis different adverse events;
(g) Frequency of review and update of the stress testing programme to reflect changing market conditions;
(h) Reporting procedures; and
(i) Guidelines on use of stress testing for broader risk management.
July 2018