Explanation:
Under the BCBS Principles for sound stress testing practices and supervision, supervisors are expected to verify the active involvement of both the board of directors and senior management. Furthermore, the principles do not universally stipulate that supervisors 'require a bank to submit at regular intervals the results of its firm-wide stress testing program' as an explicit general mandate in the exact manner described, but rather they should regularly review the stress testing framework and challenge its inputs/outputs.
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Q.69 Which of the following statements regarding recommendations to supervisors is incorrect?
A
Supervisors should evaluate whether the scenarios are consistent with the risk appetite the bank has set for itself
B
Supervisors should take corrective actions if material deficiencies in the stress testing program are identified or if the results of stress tests are not adequately taken into consideration in the decision-making process
C
Supervisors should verify the active involvement of senior management in the stress testing program and require a bank to submit at regular intervals the results of its firm-wide stress testing program
D
Supervisors should verify that stress testing forms an integral part of the ICAAP and the bank’s liquidity risk management framework
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