Liquidity Risk - Relevance to Actuaries [37]

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Bullet points include: Increasing regulatory focus on stress testing. Including liquidity stresses. E.g. Reverse stress-testing or “test to destruction”. But these again focus on the PD element. What we ideally need is a “test beyond destruction”. Otherwise we will miss the LGD element. As the FSA point out, capital is held to cover both the “going concern” and the “gone” concern situation, hence different Tiers

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