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ICAAP & Stress-Testing
Supervisors across the GCC (CBUAE, CBB, SAMA) expect banks and non-bank finance companies to embed stress-testing in capital planning. Stress exercises should be auditable, scenario-based, and linked to ICAAP outcomes — demonstrating that capital buffers remain appropriate under adverse conditions.
ICAAP stress-testing assesses an institution’s ability to withstand severe but plausible shocks to its balance sheet, earnings and liquidity. It converts macroeconomic scenarios into forward projections of credit losses, earnings, RWAs and capital ratios so boards and regulators can judge capital resilience and preparedness
Why it matters ?
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Regulatory compliance: Satisfies prudential expectations and reduces risk of supervisory findings.
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Capital resilience: Quantifies how shocks erode CET1 and informs remedial options (capital raises, asset reduction, dividend restrictions).
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Risk insight: Identifies portfolio, sector and concentration vulnerabilities before they crystallise.
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Decision support: Provides management with evidence to prioritise actions, set appetite and price risk.
Our Service Offering
Programme design & governance
Define scope, materiality, roles, and approval gates ensuring board and Risk Committee ownership.
Scenario design & macro mapping
Develop baseline, adverse and severe narratives (including GCC-relevant shocks such as oil price and FX stress) and map macro drivers to PD / LGD / EAD, NII and costs.
Data & model readiness
Assess and reconcile source data, calibrate elasticities, and validate PD/LGD/EAD, market and liquidity modules.
Projection & capital impact
Run integrated balance-sheet, P&L and RWA projections to produce forward CET1 / Tier 1 / LCR and NSFR profiles under each scenario.
Validation & sensitivity analyses
Independent model checks, back-testing, sensitivity sweeps and reverse stress testing to ensure robustness.
Reporting & remediation
Board-ready executive summaries, detailed analytical packs, regulatory submission files and a prioritized remediation roadmap with owners and timelines
