EFDI Stress Testing Work Group

Confidential

6 July 2017

Oliver Gordon

The story so far…..

Agenda

DGS Stress Testing: Scene Set

Stress Test Plans: Key Themes

FSCS Approach

Possible Challenges

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DGS Stress Testing: Scene Set (I)

» A reminder…..

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Intervention ScenarioTesting

Increased Complexity

Testing

PriorityTesting

• Pay-Out• Failure Prevention• Contribution (resolution)• Contribution (insolvency)

• SCV File Testing• Operational Capabilities• Funding• Cross Border

DGS Stress Testing: Scene Set (II)

» Questionnaire Response:

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DGS1 DGS2 DGS3 DGS4

Que

stio

n

Do you have a StressTest plan? Yes Yes Yes Yes

Have you submittedyour plan to the EBA? Yes Yes Yes Yes

Have you conducted a test under the plan? Yes Yes Yes Postponed

What was the test?- SCV File Test- Technical X-Border- Pay-Out X-Border

- SCV File Test

- SCV File Test (live)- Op Capability (live)

- SCV File Test

What were the key learnings?

- Communications- IT Support

- Technical observations

- Not all indicators covered by livescenario

- TBC (postponed)

When & what is your next test?

Operational Capability (Sept 2017)

Operational Capability &SCV File Testing

Funding & Operational Capability (Jul ‘17-Jul ‘18)

TBC

Stress Test Plans: Key Themes (I)

» What do we know about the planned testing activity….

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0

1

2

3

4

5

6

7

8

20172018

20192020

2021

NoofTests

TestYear

VolumeofPlannedTesting

SCVTesting

OperationalCapability

CrossBorder

Funding

Stress Test Plans: Key Themes (II)

» Programme Duration

› Spanning 5yr time horizon

› Focus years 1 to 3

» Separation of Duties (Steering v Delivery)

› Clear separation of Steering v Oversight

› External observer; inconsistent

» Stakeholders

› Identification of impacted parties

› Clearly calling out Designated Authority

» Starting Position

› Different entry points to the testing

› Possible delivery challenges

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FSCS Approach (I)

» Separation of Duties: Steering Group versus Delivery Group

› Utilise existing structures; Senior Management (steering) / Operational Management (delivery)

» Existing Testing & Exercising Strategy: Use It!

› Don’t reinvent the wheel – use existing methodologies

» Resourcing: Top Level Commitment

› Testing & Exercising comes at a cost; ensure that there has been full consideration of the end-to-end requirement; impact on the existing programme and securing of resources (cash / people)

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FSCS Approach (II)

Development

Preparation

DeliveryReporting

Evaluation

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FSCS Approach (III)

» The below is presented as a high level overview of the deliverables over the five year time horizon:

» SCV File Test› Scope: To perform routine checks of SCV files of credit institutions as directed by the Competent

/ Resolution Authority, including identification of depositors earmarked at branches in other Member States (where relevant).

› Execution: Ongoing, quarterly review cycle.

» Operational Cross Border Cooperation Test (Technical)› Scope: To test the DGS ability to create and transmit a test file to another DGS, with

confirmation form the host DGS that the file can be read into host systems.› Execution: April 2017

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DeliveryYear

Testing

2017 2018 2019 2020 2021SCV

√ √ √ √ √

OperationalCapabilities √ X X √ XCross-Border

√ √ X √ XFunding

X √ X √ X

FSCS Approach (IV)

» Operational Capability Test

› Scope: To test the DGS ability to effect pay-out within 7days using a credit institution which has been identified as suitable for pay-out by the Resolution Authority. The institution may be one for which insolvency and pay-out is the likely resolution, and likely to be at the upper end of that range.

› Execution: September 2017

» Operational Cross Border Cooperation Test

› Scope: To test the DGS ability to create and transmit a payment instruction file to another DGS, with confirmation form the host DGS that the file contains the relevant information to effect pay-out.

› Execution: April 2018

» Funding Capability Test

› Scope: To test the DGS adequacy of ex ante and ex post funding arrangements, and other arrangements in place for accessing alternative funding.

› Execution: September 2018

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Possible Challenges

» Approach

› Differing approach; how can EBA take comfort on approach

» Coordination

› Is there a case for central alignment in relation to Cross Border testing

» Timelines

› With differing reporting timelines, is there enough time to peer review

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» Q & A

T H A N K» Y O U