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Step in risk (Responses ( Inclusive of possible risk mitigants)…
Step in risk
Definition& Scope
decision to offer financial support to unconsolidated entities facing stress in excess of contractual obligation
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Identification
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Consider the following
Nature+degree of support ( guarantees, credit, liquidity facilities, decision making powers
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Implicit support( guarantees,
Responses ( Inclusive of possible risk mitigants) effectively increasing Capital and liquidity levels to capture the risk
- Consolidation ( if not equating to artificial improvement to capital + liquidity position)
- Conversion approach( limited step in risk) uses a variant of the CCF for Capital + cash outflow factor for Liquidity ( exposure determined as the difference between bank and non bank interest
- Include non consol entities in stress testing framework
- Provision as a deduction from CET1
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