Outcomes
By the end of this training course, trainees will be able to :
- Define the concept, objectives, and evolution of stress testing in the banking industry.
- Differentiate between various stress testing techniques including sensitivity analysis, scenario analysis, and reverse stress testing.
- Explain the relationship between stress testing, Value-at-Risk (VaR), Expected Shortfall, and other quantitative risk measures.
- Design historical and hypothetical stress testing scenarios for different banking risks.
- Apply stress testing methodologies to:
- Credit Risk.
- Market Risk.
- Liquidity Risk.
- Operational Risk.
- Analyze the impact of stressed macroeconomic and financial variables on bank performance and resilience.
- Evaluate the effect of stress scenarios on capital adequacy, liquidity positions, earnings, and portfolio quality.
- Identify stress testing governance requirements, including:
- Roles of the Board and Senior Management.
- Policies and procedures.
- Validation and independent review.
- Internal audit responsibilities.
- Interpret stress testing outputs and use them to support strategic decision-making, contingency planning, and risk appetite frameworks.
- Recognize the limitations, assumptions, and practical challenges associated with stress testing implementation.
Target Group
- Risk Management Officers and Analysts.
- Market Risk and Liquidity Risk Teams.
- Credit Risk Officers.
- Treasury and ALM Staff.
- Internal Audit and Compliance Officers.
- Financial Stability and Regulatory Reporting Teams.
- Basel / ICAAP / Stress Testing Specialists.
- Senior Managers involved in Risk Governance and Capital Planning.
Contents
- Introduction and definitions:
- What are stress tests?
- History of stress testing.
- Using of stress tests:
- Stress testing techniques.
- Stress testing and value-at-risk.
- Managing portfolios using VaR.
- Scenario analysis methodologies.
- implementation – technical requirements and designs.
- Limitations of stress tests.
- Practical applications:
- Financial Soundness Indicators.
- Stress tests scenarios.
- Credit Risk.
- Market Risk.
- Liquidity Risk .
- Operational Risk.
- Governance over stress testing:
- Objectives and scope.
- Roles and responsibilities.
- Policies, procedures and documentation.
- Validation, independent review and role of internal audit.
- Aspects of stress testing governance.
- Cases study and practical examples.