CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

FCA 2013/xx
(b)
(c)
sudden and severe events, such as market shocks or other
similar events; and
some combination of the circumstances and events described in
(a) and (b), which may include a sudden and severe market
event followed by an economic recession.
(3) In carrying out the stress tests and scenario analyses in (1), the firm
must estimate the financial resources that it would need in order to
continue to meet the overall financial adequacy rule and the own funds
requirements under the obligations laid down in Part Three of the EU
CRR (Capital requirements) in the adverse circumstances being
considered.
(4) In carrying out the stress tests and scenario analyses in (1), the firm
must assess how risks aggregate across business lines or units, any
material non-linear or contingent risks and how risk correlations may
increase in stressed conditions.
(5) A firm must carry out the stress tests and scenario analyses at least
annually, unless:
(a)
(b)
it is notified by the FCA to carry out more frequent or ad-hoc
stress tests and scenario analyses; or
the nature, scale and complexity of the major sources of risk
identified by it under the overall Pillar 2 rule make it
appropriate to carry out more frequent stress tests and scenario
analyses.
(6) A firm must report to the FCA the results of the stress tests and
scenario analysis annually and not later than three months after its
annual reporting date.
[Note: article 100 of CRD]
2.2.38 G To comply with the general stress and scenario testing rule, a firm should
undertake a broad range of stress tests which reflect a variety of perspectives,
including sensitivity analysis, scenario analysis and stress testing on an
individual portfolio as well as a firm-wide level.
2.2.39 G A firm with an IRB permission which has any material credit exposures
excluded from its IRB models should also include these exposures in its stress
and scenario testing to meet its obligations under the general stress and
scenario testing rule. A firm without IRB permission should conduct analyses
to assess risks to the credit quality of its counterparties, including any
protection sellers, considering both on and off-balance sheet exposures.
2.2.40 G In carrying out the stress tests and scenario analyses under IFPRU 2.2.37R(1),
a firm should also consider any impact of the adverse circumstances on its
own funds. In particular, a firm should consider the capital ratios in article 92
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