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

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

33. Operational risk: six-monthly return

Directives and interpretations for completion of six-monthly return concerning operational risk (Form BA 400)

Subregulation (9) Advanced measurement approach

Subregulation (9)(d) Qualifying criteria

Subregulation (9)(d)(vii) Scenario analysis

 

(vii)        Scenario analysis

 

As a minimum, a bank—

(A) shall use scenario analysis in conjunction with external data in order to evaluate—
(i) the bank's exposure to high-severity events;
(ii) the impact of deviations from the correlation assumptions embedded in the bank's operational risk measurement framework;
(iii) potential losses which may arise from multiple simultaneous operational risk loss events;
(B) shall have adequately skilled staff—
(i) to conduct the scenario analysis;
(ii) to derive reasoned assessments of plausible severe losses;
(C) shall over time, in order to ensure the reasonableness of its risk measures and assessments, validate and re-assess the said assessments of plausible severe losses generated through scenario analysis through comparison to actual loss experience.