Delivering a first-time LSI Stress Test under tight deadlines

The national regulator requires all financial institutions to complete the LSI Stress Test (Less-Significant Institution Stress Test) every two years. For this multinational private bank, it was the first time performing the exercise. With a short deadline and no dedicated systems in place, Avantage Reply supported the setup of the necessary calculations and the preparation of the regulatory templates to be submitted, ensuring all prescribed rules and restrictions were respected and that results met supervisory expectations.

Operational imperatives

Informed of the test at short notice, the bank’s main objective was to complete all required calculations and disclosures on time without disrupting day-to-day business. Given the limited timeframe, a pragmatic yet accurate solution was required, as implementing a full reporting system was not feasible.

Key constraints

The primary challenge stemmed from the novelty of the regulatory requirement. The bank had no existing tools capable of performing the required stress calculations in a satisfactory manner. Combined with tight submission timelines, this created significant delivery pressure.

Structured and compliant execution

Avantage Reply provided a consultant responsible for calculating forecasted values under the prescribed stress scenarios. The work included analysing regulatory documentation, translating requirements into specifications for the calculation tool, supporting its development and testing, validating the accuracy of results, preparing the reporting templates, and documenting the methodology and approach.

If your institution is facing similar regulatory stress testing challenges or requires pragmatic support under tight deadlines, our experts are ready to assist.