stress-testing

ICAAP PURPOSE AND STRUCTURE

The ICAAP (Internal Capital Adequacy Assessment Process) is the bank's own assessment of how much capital it needs given its specific risk profile, strategic plan, and stress scenarios. The regulator uses the ICAAP output to set Pillar 2 requirements.

Required sections:

1. Business model and strategic overview
2. Risk identification — material risks and their capital impact
3. Capital quantification — Pillar 1 and Pillar 2 needs by risk type
4. Stress testing — capital depletion under severe macroeconomic scenarios
5. Capital planning — sources of capital and management actions under stress
6. Capital adequacy conclusion — does the bank hold sufficient capital?

STRESS TEST FRAMEWORK

Scenario Design