Principles for sound stress testing
A new consultative paper from the Basel Committee on Banking Supervision presents sound principles for the governance, design and implementation of stress testing programmes at banks.
The paper says that a sound stress testing programme should:
be directed by the board and senior management,
provide forward-looking assessments of risk,
complement information from models and historical data,
be an integral part of capital and liquidity planning,
guide the setting of a bank's risk tolerance, and
f
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