Stress testing meaning

Purpose of this Checklist This checklist supports Solvency II UK firms in aligning governance, systems and controls with the expectations of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). It should be read alongside Practice Note: Governance, systems and controls requirements for insurers, which provides a more detailed overview of the relevant requirements. Governance and organisational structure Confirm the board holds ultimate accountability for compliance with PRA, FCA and applicable legislative obligations. Establish a robust system of governance, featuring a transparent organisational structure with clearly allocated and segregated responsibilities. Regularly review and update written policies covering risk management, internal control, internal audit and, where relevant, outsourcing. Maintain documented governing body approvals for significant decisions and policy changes. Risk management Implement and embed an effective risk‑management system within decision‑making, ensuring ongoing identification, measurement, monitoring, management and reporting of risks. Incorporate comprehensive strategies, stress testing, scenario analysis and development of the own risk and...

This checklist outlines the regulatory obligations for financial services firms in relation to reverse stress testing. The requirements are located in chapter 7.5 of the Prudential sourcebook for MiFID Investment Firms (MIFIDPRU 7.5) within the Financial Conduct Authority (FCA) Handbook (where reverse stress testing constitutes part of the internal capital adequacy and risk assessment (ICARA) process) and in the Internal Capital Adequacy Assessment Part of the Prudential Regulation Authority (PRA) Rulebook... What is reverse stress testing? MiFIDPRU and the Internal Capital Adequacy Assessment Part provide comparable, though not matching, definitions of reverse stress testing...

In this issue: UK, EU and international regulators and bodies Prudential requirements Risk management and controls Operational resilience Financial crime and sanctions Complaints, compensation and claims management Investigations, enforcement and discipline Regulation of capital markets Sustainable finance and ESG Banks and mutuals Investment funds and asset management Consumer credit, mortgage and home finance Regulation of insurance Payment services and systems Fintech and cryptoassets Regulation of AI in FS Dates for your diary New and updated content Financial Services Enforcement Database Daily and weekly news alerts LexTalk®Financial Services: a Lexis®Nexis community UK, EU and international regulators and bodies ESAs publish spring 2026 joint risk update The three European Supervisory Authorities—the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority—have released their Joint Committee spring 2026 update examining risks and vulnerabilities across the EU financial system....

In this issue: Competition and state aid Data protection and cybersecurity Free movement, immigration and employment Financial services Environment Insurance and reinsurance IP Life sciences TMT Daily and weekly news alerts New and updated content Trackers Competition and state aid Antitrust—Court of Justice dismisses Teva and Cephalon’s appeal against ‘pay-for-delay’ fines The Court of Justice has handed down its judgment in Case C-2/24 P, Teva Pharmaceutical Industries and Cephalon v Commission, challenging the General Court’s judgment in Case T-74/21 that upheld the Commission’s 2020 fines for a pay-for-delay arrangement which postponed the entry of a generic form of modafinil. The Court rejected the appeal in full. See News Analysis: EU Competition law—daily round-up (23/10/2025). Data protection and cybersecurity Commission releases internal Cloud Sovereignty Framework The European Commission has published an internal Cloud Sovereignty Framework laying down baseline requirements to ensure that processing and storage of data within EU...

In this issue EU fundamentals Competition and state aid Data protection and cybersecurity Financial services Energy Environment Insurance and reinsurance Life sciences Regulatory TMT Daily and weekly news alerts New and updated content Trackers EU fundamentals EU Law—key developments in 2025 and horizon scanning for 2026 This News Analysis distils the principal EU developments from 2025 and highlights what is expected in 2026. See News Analysis: EU Law—key developments in 2025 and horizon scanning for 2026. Competition and state aid Antitrust—Google and Alphabet v Commission An application for annulment has been submitted to the General Court in Case T-794/25, Google and Alphabet v Commission, contesting the Commission’s prohibition decision on Adtech and data-related practices (abuse of dominance) (AT.40670), under Article 102 TFEU and Article 54 of the EEA Agreement—see further, application. See News Analysis: EU Competition law—daily round-up (12/01/2026). Foreign Subsidies Regulation—Commission’s guidelines The Commission...

PI & Clinical negligence horizon scanner—July 2025 [Archived] ARCHIVED: This Practice Note is archived and is not maintained. It summarises the principal legal developments relevant to personal injury and clinical negligence practitioners as at July 2025. For developments predating this horizon scanner, see PI and Clinical Negligence horizon scanning and key cases—overview. Key PI and clinical negligence developments The personal injury discount rate—a review In late 2024, the Lord Chancellor, Shabana Mahmood MP, revealed the outcome of her five‑month review of the discount rate, initiated in July 2024. One month after the new +0.5% discount rate took effect, Thea Wilson (barrister at 12 King’s Bench Walk) assesses its impact on cases, the responses from claimant and defendant representatives, and the consequences of the change for legal practitioners. See News Analysis: The personal injury discount rate—a review. MoJ announces reduction in CFO’s interest rates The Ministry of Justice (MoJ) has announced lower interest rates for the Courts Funds Office’s (CFO) special and basic accounts...

This Practice Note examines the key financial covenants commonly found in a real estate finance transaction. Purpose of financial covenants Financial covenants are used across many types of commercial finance (see Practice Note: Introductory guide to financial covenants). They are a distinct form of covenant or undertaking, being commitments to meet defined financial thresholds. See Practice Note: Introductory guide to financial covenants—What are financial covenants? Financial covenants enable the lender to oversee the borrower’s financial performance and provide these benefits: they assess the borrower’s financial position using objective, readily measurable criteria they highlight potential financial stress before any payment default arises, allowing the lender to act sooner than waiting for non-payment if a breach occurs, they allow the lender to protect its position by calling an event of default and accelerating the loan/enforcing security, or by potentially requiring mandatory prepayment For more on financial covenants in a general context, see Practice Note: Introductory guide to financial covenants—Why financial covenants are...

What are CCPs and what do they do? A central counterparty (CCP) is a form of financial institution, often called a clearing house, that enables the clearing of both over-the-counter (OTC) derivatives and exchange-traded derivatives (ETDs). CCPs are recognised as financial market infrastructures (FMIs). A derivative is a financial instrument whose value is set by reference to, and therefore derived from, an underlying asset, index, rate, reference point or risk (known as the underlying asset or simply the underlying). Derivatives are bi-lateral agreements that shift some or all of the risk and reward linked to the underlying from one party to another, without any immediate delivery of the underlying item. The terms of OTC derivatives are negotiated directly between the counterparties, or in certain instances arranged via a broker. OTC derivatives are distinct from derivatives, typically futures or options, that are traded on public exchanges (called exchange-traded derivatives or ETDs). For ETDs, contract terms are defined by the exchanges on which they trade, not by the contracting parties. ETDs...

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