On May 26, 2015, the Bank of England published a report on stress testing the UK banking system, which includes guidance on the traded risk methodology for participating banks and building societies. The document sets out the approach that banks are expected to take in the execution of the stress test of the UK banking system relating to trading positions. The guidance is designed to assist firms to carry out their own analysis for the stress test. The BoE also published a traded risk and structured finance scenario. This is a “tail risk” scenario, designed to assess the resilience of banks to deterioration in global economic conditions.
The report and scenario are available at: http://www.bankofengland.co.uk/financialstability/Documents/stresstesting/2015/tradedriskguidance.pdf; and http://www.bankofengland.co.uk/financialstability/Documents/stresstesting/2015/tradedrisk2015.xlsx.