Practical application of
STRESS TESTING, RECOVERY & RESOLUTION PLANNING IN LIGHT OF COVID-19
Stress testing is now a critical element of risk management for banks. It alerts bank management to unexpected adverse outcomes arising from a wide range of risks, and provides an indication to banks and supervisors of the financial resources that might be needed to absorb losses should large shocks occur.
Recovery & Resolution planning is important for all banks as it increases their resilience to stress scenarios. Banks should develop recovery plans that identify credible options to survive a range of severe but plausible stressed scenarios. This should be part of the good management of a bank, not just a response to a regulatory requirement.
Regulators and Central bankers view recovery & resolution planning as an important component of the post-pandemic reforms. It increases the resilience of banks to stress and reduces the probability that a bank will fail.
On completion of this workshop, participants will be able to:
- Identify the features and types of stress tests and how they are applied in practice
- Define the function and features of macro, or aggregate, stress tests
- Figure out how to integrate Stress Tests in Enterprise-Wide Risk Management Framework
- Discuss how to benefit from considering in a structured way the potential impact of adverse scenarios on the day to day business.
- Describe the main components of a well-documented Recovery & Resolution plan