6 Scenario analysis
Since the global financial crisis of 2008, banks have increasingly used scenario analysis. Certain financial supervisors, such as the Bank of England, have been requiring banks to use this analytical tool to evaluate how specific scenarios would impact the assets in their investment portfolios. Financial supervisors themselves have also used this analytical tool to evaluate banks operating within their jurisdiction. The general purpose of this has been to determine whether a major financial crisis, such as the economic conditions associated with a severe recession, would adversely impact a bank’s ability to satisfy ...
