Capital Markets Examiner School, Providence, RI

Stress Scenario Development - Assumptions

• Scenarios are the high-level picture of a potential negative event – Once the “event” has been determined, it must be defined through assumptions

• Do the assumptions generated for that scenario accurately reflect the event?

• Are assumptions kept relevant to the bank’s balance sheet and cash flows?

• Are short-term and long-term, integrated impacts considered? – Yield Curve Shifts – Regulatory Actions

LIQUIDITY STRESS TESTING (LST) Quantitative Analysis of the Stress scenarios