ST-1.8.2

The independent reviews of the stress testing framework undertaken in accordance with Paragraphs HC-6.6.33 and HC-6.6.34, must cover the following:

(a) Effectiveness of the stress testing programme in meeting its intended purposes, and the requirements of this Module;
(b) Adequacy of management oversight and approval process;
(c) Adequacy of documentation for the programme;
(d) Comprehensiveness of risk exposures captured by the programme, and the methodologies, scenarios and assumptions used;
(e) Verification of the quality of data sources used to run the stress tests (e.g. in terms of accuracy, consistency, timeliness, completeness and reliability);
(f) Implementation of the programme, as well as subsequent authorization for, and implementation of, significant changes or development work (e.g. to take account of changes in bank's business strategies, risk characteristics or external environment);
(g) Integration of stress testing into risk management and decision-making processes at appropriate management levels, including capital and liquidity planning;
(h) Integrity of management information and reporting systems for the stress tests; and
(i) Validation of stress testing results, such as through backtesting historical scenarios (e.g. the 2008/09 Global Financial Crisis and the 1997 Asian Financial Crisis) and their impact on a bank's portfolio, or benchmarking with other stress tests conducted within and outside the bank.
Amended: January 2022
Added: July 2018