Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Purchase

(10)	Matters related to a bank-specific stress mismatch

A bank—

(a)	shall obtain the prior written approval of its board of directors or board approved committee in respect of any going-concern behavioural or other relevant assumption and reasoning applied in respect of the bank-specific stress mismatch;

(b)	shall on request submit to the Registrar all relevant board approved assumptions and reasoning applied in respect of the bank-specific stress mismatch;

(c)	shall have in place sufficiently robust early warning indicators to identify the emergence of increased risk or vulnerabilities in its liquidity position or funding needs;

(d)	shall regularly perform robust liquidity stress tests or scenario analyses, which stress tests or scenario analyses shall be based on the bank's relevant strategic and business plans—

(i)	in order to ensure that—

(A)	the bank has in place an adequate framework that satisfactorily accounts for the liquidity risk inherent in its individual products and business lines;

(B)	the bank estimates and understands the potential behavioural aspects related to the repayment of assets and the withdrawal of deposits under a bank specific stress scenario;

(C)	the bank duly identifies the potential sources of liquidity strain;

(D)	the bank's incentives at business level are aligned with the overall risk tolerance of the bank;

(E)	the bank duly considers the amount of liquidity it may need to satisfy contingent obligations;

(F)	the bank duly considers and understands the potential impact of any plausible severe and prolonged liquidity disruption;

(ii)	in order to identify and quantify the bank's exposure to possible future liquidity stresses;

(iii)

to analyse possible impacts on the bank's cash flows, liquidity positions, profitability, and solvency;

(iv)	the results of which stress tests or scenario analyses—

(A)	shall be thoroughly discussed and understood by the bank's senior management;

(B)	shall form the basis for taking remedial or mitigating action—

(i)	to limit the bank's liquidity exposure;

(ii)	to timely build up a liquidity cushion;

(iii)

to timely adjust the bank's liquidity profile according to the bank's risk tolerance approved by the bank's board of directors;

(C)	shall be appropriately linked to and play a key role in shaping the bank's contingency funding plan, which, among other things, shall outline policies for managing a range of stress events and clearly set out strategies for addressing liquidity shortfalls in emergency situations;

(e)	shall duly document any related policies, procedures and underlying workings in respect of its relevant stress mismatch;

(f)	shall report the bank-specific stress mismatch on a static gap basis.