FSA sets out a good practice model for financial sector stress testing The FSA has worked extensively with firms to establish the extent and type of stress testing carried out and to establish what good practice ‘would look like’. It has compiled the results of this work into a paper and is now inviting comments on its contents. Hector Sants, the FSA's managing director for Wholesale & Institutional Markets, said: "Stress testing is a key component of good management practice. The FSA has worked extensively with firms to understand current practice and in particular to develop thinking about good practice in this area. “I am encouraged that firms are improving their stress testing. However, the picture is mixed, and there is certainly scope for firms to improve their stress testing and to more fully embed it within their risk management process. It is also critical that senior management of firms engage with both the process and the outcomes. Stress testing should be a key component of a comprehensive approach to risk management. We are particularly keen that this comprehensive approach includes non-market risk such as reputational and operational risk. “The FSA does not plan new rules in this area. We will continue to work with firms to help them to develop their stress testing practices on a proportionate basis, appropriate to the firm." This autumn the FSA intends to hold a conference to discuss with firms the development of stress testing methodologies and to utilise the feedback from the conference and the discussion paper to further refine the good practice model. The FSA's discussion paper is entitled 'Stress testing' and it can be downloaded from http://www.fsa.gov.uk/pages/library/policy/dp/2005/05_02.shtml The deadline for responses is 30th August 2005.
•Date: 8th June 2005 • Region: UK • Type:
Article •Topic:
Financial sector |
