8
Stress testing
8.1
The PRA expects the ORSA to include a sufficiently wide range of plausible stress tests derived from the strategy and key risks identified during the process, to include a summary of the outputs from these tests and to describe how they affect firms’ solvency positions before and after proposed management actions.
- 25/11/2016
8.2
The PRA expects firms to apply reverse stress testing as part of their ORSA process. The ORSA report should define what constitutes business failure and then detail what events could drive that outcome.
- 25/11/2016
8.3
Firms are expected to perform sensitivity tests as part of stress testing. Within this assessment, firms are expected to identify key model assumptions and parameters used, given changes in parameters and its impact on capital.
- 25/11/2016
8.4
The PRA expects firms to consider the quality and volatility of own funds with consideration of the capital’s loss absorbing capacity under different scenarios.
- 25/11/2016