Authorised Firm must conduct stress tests regularly to identify sources of potential liquidity strain and to ensure that its exposures remain within its Liquidity Risk tolerance.
(2) When using stress testing in accordance with (1), an
Authorised Firm must:
(a) use scenarios based on varying degrees of short-term and protracted institution-specific and market-wide stress (individually and in combination); and
(b) include a cash-flow projection for each scenario tested, based on reasonable estimates of the impact (both on and off-balance sheet) of that scenario on the
Authorised Firm's funding needs and sources.
Authorised Firmmust fully document its stress test scenarios and related assumptions, and review the scenarios and assumptions, at least annually to ensure they remain appropriate.