Principles for Sound Stress Testing Practices and Supervision.¶
Basel Committee on Banking Supervision. (2009). Principles for Sound Stress Testing Practices and Supervision.
Cited by¶
8 citations across 8 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Wargaming
- Policy and diplomacy: crisis simulations, Track II exercises, sanctions tabletops. Financial regulation: stress-testing scenarios where the adversarial element is a hostile market regime.
This sourceEstablishes severe, forward-looking stress-testing scenarios in financial regulation.
- Policy and diplomacy: crisis simulations, Track II exercises, sanctions tabletops. Financial regulation: stress-testing scenarios where the adversarial element is a hostile market regime.
Mechanisms¶
- Assumption Stress Test
- … strength is discrimination: it separates the assumptions that merely worry people from the ones that actually decide the outcome, and it does so by working the plan's own logic — a discipline formalized in reverse stress testing, which starts from the failed state and asks what set of conditions would produce it
This sourceDefines reverse stress testing as starting from a specified adverse outcome and identifying the events that could produce it.
- … strength is discrimination: it separates the assumptions that merely worry people from the ones that actually decide the outcome, and it does so by working the plan's own logic — a discipline formalized in reverse stress testing, which starts from the failed state and asks what set of conditions would produce it
- Post-Windfall Stress Test
- The named practice it draws on is reverse stress testing, which deliberately starts from the failure state and works back to the conditions that cause it, precisely so that only-survivable scenarios aren't the only ones examined.
This sourceDefines reverse stress testing as starting from a known failure outcome and working backward to events that could cause it, including scenarios that threaten the firm's viability.
- The named practice it draws on is reverse stress testing, which deliberately starts from the failure state and works back to the conditions that cause it, precisely so that only-survivable scenarios aren't the only ones examined.
- Scenario Factor Stress Test
- The corrective is to work the problem backward — reverse stress testing, the practice of fixing an unacceptable outcome and searching for the combination of shocks that would produce it, which surfaces exactly the scenarios optimism would skip.
This sourceDefines reverse stress testing as starting from a known severe outcome and searching backward for the events and interactions that could produce it.
- The corrective is to work the problem backward — reverse stress testing, the practice of fixing an unacceptable outcome and searching for the combination of shocks that would produce it, which surfaces exactly the scenarios optimism would skip.
- Scenario Stress Test
- Its strength is that it exposes joint fragility — the failure mode where several premises each look safe alone but collapse together under a common cause, the very surprise a single-variable check will always miss.
This sourceScenario stress tests can reveal correlated exposures, interacting risks, and feedback effects that isolated single-parameter tests do not capture.
- Its strength is that it exposes joint fragility — the failure mode where several premises each look safe alone but collapse together under a common cause, the very surprise a single-variable check will always miss.
- Stress-Correlation Scenario
- Its weakness is that the answer is only as good as the posited correlations, which are judgement rather than data — so a scenario can be set too mild (comfortable and useless) or arbitrarily severe (alarmist and ignored), and any single scenario is one guess among many.
This sourceWarns that stress scenarios depend heavily on expert judgment about correlations and that underestimated correlations can make stress results unreliable.
- Its weakness is that the answer is only as good as the posited correlations, which are judgement rather than data — so a scenario can be set too mild (comfortable and useless) or arbitrarily severe (alarmist and ignored), and any single scenario is one guess among many.
- Stress Test and Reverse Stress Test
- Reverse testing is the structural guard against this
This sourceUses reverse stress testing to search backward from viability-threatening outcomes and warns that dismissing remote events can obscure real vulnerabilities.
- Reverse testing is the structural guard against this
- Stress-Test Margin Check
- The disciplines are to include coincident and correlated failures
This sourceCalls for stress scenarios that combine correlated failures and are refreshed as risks and information change.
- The disciplines are to include coincident and correlated failures
Verification¶
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Links previously used in the corpus¶
Before the registry existed this work was also linked 2 other ways.
- https://www.bis.org/publ/bcbs155.pdf ×4
- https://www.bis.org/publications/200905-guidelines-principles-sound-stress-testing-practices-and-supervision ×1
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