Regulatory Alerts2008-12-17 | Amendment of the parameters for conducting BaFin stress tests from 2009 (Circular 1/2004)Amendment to BaFin Stress Test Parameters under Circular 1/2004
BaFin has amended the stress test parameters under Circular 1/2004, effective 31 December 2008. The update recalibrates the equities-only, mixed bonds/equities, and mixed property/equities scenarios by applying tiered stress factors based on EuroStoxx50 index levels, while maintaining the R 10 scenario. Institutions must additionally incorporate credit risk discounts for fixed-income investments and loans into all applicable stress test scenarios.
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In accordance with Circular 1/2004 ( VA )
BaFin hereby announces an amendment to the parameters for conducting stress tests stipulated in part A of the circular.
17.12.2008
As from 31 December 2008, the stress test scenarios A 35, RA 25 and AI 30 stipulated in Circular 1/2004 ( VA ) (see announcement in BaFinJournal Januar 2008) will be amended to the following scenarios:
Equities-only scenario: a fall in share prices based on the index calibration at 31 December 2008. Mixed bonds/equities scenario: a fall in share prices based on the index calibration at 31 December 2008 and a 5% drop in the price of fixed-income securities. Mixed property/equities scenario: a fall in share prices based on the index calibration at 31 December 2008 and a 10% drop in the market value of properties.
Stress test scenario R 10 remains unchanged.
The discounts applied to equities, based on the calibration of the EuroStoxx50 price index at 31 December 2008, are as follows:
Level of EuroStoxx 50 (price index) Stress factor in % (equities-only scenario) Stress factor in % (mixed scenarios) from 5246 to 5435 or above 45 25 from 5056 to 5245 45 25 from 4866 to 5055 45 25 from 4676 to 4865 45 25 from 4486 to 4675 44 24 from 4296 to 4485 41 22 from 4106 to 4295 38 21 from 3916 to 4105 35 20 from 3726 to 3915 32 19 from 3536 to 3725 29 18 from 3346 to 3535 27 17 from 3156 to 3345 24 16 from 2966 to 3155 22 15 from 2776 to 2965 20 14 from 2586 to 2775 18 13 from 2396 to 2585 16 12 from 2206 to 2395 14 12 from 2016 to 2205 13 11 from 1826 to 2015 11 11 up to 1825 10 10
In addition, the credit risk discounts for fixed-income investments and loans must be incorporated in every stress test scenario in accordance with Circular 1/2004 part A.
The other stipulations of Circular 1/2004 remain unchanged.
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