Join Mailing List

For latest news and information about Treasury and Financial Markets, enter your details below:

Reverse stress testing is not stress testing

Print Preview Send to a Friend Share

Published: 9th March 2011 by William Webster

The FSA has issued guidance consultation on reverse stress testing (Reverse stress-testing surgeries - FAQ). Some firms will fear that because reverse stress testing is relatively new the regulatory process will involve trial and error. So how can you undertake reverse stress testing and have a good chance of doing it well first time round?

Using the maxim of KISS here are 24 FAQ.

Register for free or login to view the full publication

Displaying 1 to 6 of 6 results in total.

Related Documents

Registration RequiredRegulation > Consultation Paper 08/24 Stress and scenario testing December 2008 100% relevant

12th April 2009

The FSA wants to see more stress and scenario testing in firms. Senior management should be involved. Previous assumptions have been too relaxed. Stress testing should be in detail with the mitigating actions rehearsed. Reverse stress testing is introduced as a method of identifying critical events. The FSA is not going to tell you how to do this, it's up to you. However firms can expect greater challenge on the assumptions made.


Registration RequiredRegulation > Policy statement 09/20 Stress testing and scenario testing December 2009 100% relevant

18th December 2009

What's stress testing about? The regulator is imposing a stress testing regime on firms because the risk management techniques employed before the crisis did not accurately reflect what could happen. In particular risk models allowed firms (and regulators) to ignore tail-risks. As a result many firms have found themselves badly exposed in the crisis. In order to mitigate against this happening again the FSA is making stress testing and reverse stress testing mandatory. Let's answer a few questions.


Free to ViewReverse stress testing 73% relevant

20th August 2010

What is reverse stress testing? It is the process of uncovering events that, should they occur, have the potential to make your business unviable. Such events can cover credit, market and liquidity risk. It's important to remember that business failure occurs before you run out of capital. It's when counterparties are unwilling to deal with you.


Free to ViewDealing With Uncertainty - Part Two 40% relevant

16th June 2020

In Part One I summarised that: There are three types of stress test and you need to be aware of which you are using. In our business we have assumptions and guesses about people’s behaviour and the future. This means our tests are approximations of risk. We aren’t dealing with construction and we aren’t engineers therefore red, amber and green paints a simple but potentially misleading picture.


Free to ViewWhat's your appetite for stress testing? 39% relevant

16th June 2010

A lot's been written about the board's appetite or tolerance for risk. But very little has been said about what this means. Perhaps this will help.


Registration RequiredReverse repo 34% relevant

22nd February 2010

There are two parties to a repurchase transaction (repo). The party that provides (sells) the collateral is doing a repo. The party that takes (buys) the collateral is doing a reverse repo. Let's see this in a diagram: