Stress Testing

Although Christmas seems a long way off, relevant BIPRU firms may wish to ensure that they are on track to meet the reverse stress testing requirements that come into force on the 14 December and which was originally flagged up in Regulatory Roundup 6 from 18 December last year.

Reverse stress testing is the testing of a business plan to failure and will be covered in SYSC 20 (the rules are accessible now if you use the time travel facility on the FSA website). The new SYSC chapter amplifies SYSC 7.1.1 to SYSC 7.1.8 on risk control.

SYSC 20 will apply to BIPRU firms although a BIPRU investment firm will be excluded from the scope of SYSC 20 if:

1. it manages investment or safeguards and administers investments of under £10bn; or
2. total annual fee and commission income from its regulated activities is no more than £250m; or
3. it has assets and liabilities of no more than £2bn

All criteria apply on a consolidated basis to all BIPRU investment firms in the group. Reference should be made to SYSC 20.1.1R(2) for the precise exclusion parameters.