02 — Capability · BC-1780.30
Capital Adequacy & Stress Testing
Hold enough capital, in the right forms, for the risks the firm carries today and in plausible severe futures, and prove it to the board and supervisors, with a plan for recovery or orderly resolution if it fails. Executing debt and equity issuance sits in Treasury.
- Capital Management
- Regulatory Capital
- Solvency Assessment
In scope
- Risk-weighted asset and regulatory capital calculation
- ICAAP and ORSA internal capital assessments
- Internal and supervisory capital stress tests
- Insurance solvency capital, solvency-basis technical provisions and recovery and resolution plans
Out of scope
- Executing funding and capital issuance, including a bank's own (see BC-230.20); this capability sets how much capital is needed
- Actuarial reserving on accounting and statutory bases (see BC-1740.60)
- Setting case reserves on individual claims (see BC-1750.20.30)
Decomposes into · 6
- BC-1780.30.10Risk-Weighted Asset CalculationCalculate RWA for credit, market and operational risk under the standardized approaches or, where the supervisor permits, internal models for credit and market risk, and the capital ratios that follow.
- BC-1780.30.20Internal Capital AssessmentAssess the firm's own view of the capital its risks require, including risks the regulatory formula misses, and document it for the board and supervisor.
- BC-1780.30.30Regulatory Stress TestingProject earnings, losses and capital under supervisory and internal scenarios and submit results and capital plans on the supervisor's timetable.
- BC-1780.30.40Insurance Solvency CapitalCalculate the solvency capital requirement and eligible own funds for an insurer under its regime, such as Solvency II or a risk-based capital regime.
- BC-1780.30.50Solvency Technical ProvisionsValue technical provisions on the solvency basis (best estimate plus risk margin) for the capital calculation, starting from the actuarial reserves on other bases.
- BC-1780.30.60Recovery & Resolution PlanningMaintain the plan for restoring capital and liquidity under severe stress, and the information supervisors need to resolve the firm in an orderly way if recovery fails.