Large Bank Examination Workshop February 2026

Stress Scenario Governance The process is led by the Board, which should be: • Cognizant of the key liquidity risks faced by the institution • Challenging approaches, scenarios and outputs • Approving approaches, scenarios and outputs • Receiving sufficient training to support these objectives

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Stress Testing Elements

• Sensitivity analysis  Defined by shift in one sensitivity variable  Relatively easy to define and implement — often used at trading desk and business line level • Scenario analysis  Shifting many variables simultaneously  More accurate depiction of real-life developments • Simulation  Shifts in several variables have to be used in order to simulate historical events  Correct use of stressed correlations between risk types is essential • Reverse Stress Tests  Starting with the point at which the bank fails and then “rewinding” to determine key causes

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© Global Financial Markets Institute Inc.

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