Modern stress-testing regimes are relatively new. Regulators are evolving and refining their supervisory models year-on-year. Simultaneously, banks face the complex challenge of delivering against the current regulatory mandate, in addition to designing and implementing a sustainable and cost-effective stress-testing model for the future.

Banks have been performing some form of macroprudential assessment since the mid-1990s. Therefore, most institutions are relatively adept at executing the technical tests defined by various supervisory bodies.

However, until recently, the qualitative aspects of the agenda have been neglected and often overlooked. Duly, supervisory bodies are placing an increasing onus on the quality of institutional approaches to stress-testing.

Indeed, the PRA has stated that the identification of qualitative shortcomings will inevitably prompt ‘less confidence in the results of stress testing and may set a higher PRA buffer assessment’1. Consequently, the imperative to ‘look beyond the numbers’ has never been greater….

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