Stress testing is a risk management tool used to assess the financial strength of a licensed person and the impact on the licensed person’s solvency and profitability under a defined set of alternative assumptions with outcomes that are adverse but plausible.
The policy objective of this policy document is to provide standards and guidance for the insurance and takaful industry in conducting stress testing to support a licensed person’s risk and capital management. Stress testing by licensed persons also forms part of the Bank’s supervisory framework and monitoring of risks in the financial system.
This policy document sets out the following:
(a) key principles that licensed persons must observe when conducting stress testing;
(b) requirements for conducting stress testing under both internally developed scenarios and scenarios specified by the Bank; and
(c) requirements for the governance and documentation of the stress testing programme.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
