From banking
Activate for: ICAAP, ILAAP, stress test, capital depletion, reverse stress test, ACS (Annual Cyclical Scenario), DFAST, CCAR, BoE stress test, EBA stress test, stressed capital ratio, Pillar 2, capital planning, going concern, stressed ECL, stressed RWA, stressed NII. NOT for: IFRS 9 macroeconomic scenario weighting (use ifrs9-scenarios), market risk capital under FRTB (use basel-rwa-market), liquidity stress testing for LCR/NSFR purposes (use liquidity-lcr / liquidity-nsfr).
npx claudepluginhub panaversity/agentfactory-business-plugins --plugin bankingThis skill uses the workspace's default tool permissions.
The ICAAP (Internal Capital Adequacy Assessment Process) is the bank's own
Activate for: CET1, Tier 1, Total Capital, capital ratio, RWA, risk-weighted assets, Basel III, Basel IV, capital adequacy, capital buffers, MDA, maximum distributable amount, leverage ratio, ICAAP, output floor, Pillar 2, CCB, CCyB, G-SIB, D-SIB, capital conservation buffer. NOT for: credit risk RWA calculation detail (use basel-rwa-credit), market risk FRTB capital (use basel-rwa-market), liquidity ratios LCR/NSFR (use liquidity-lcr / liquidity-nsfr).
Stress-tests business assumptions like market size, revenue projections, retention by isolating claims, sourcing counter-evidence, and modeling bear-case scenarios.
Suggests manual /compact at logical task boundaries in long Claude Code sessions and multi-phase tasks to avoid arbitrary auto-compaction losses.
Share bugs, ideas, or general feedback.
The ICAAP (Internal Capital Adequacy Assessment Process) is the bank's own assessment of how much capital it needs given its specific risk profile, strategic plan, and stress scenarios. The regulator uses the ICAAP output to set Pillar 2 requirements.
Required sections:
Base case: 3-year capital projection under central business plan assumptions. Adverse scenario: Moderate downturn (unemployment +2pp, GDP -1%, HPI -10%). Severe scenario: Deep recession (unemployment +4pp, GDP -4%, HPI -30%). Bank-specific idiosyncratic scenario: scenario tailored to bank's specific vulnerabilities (e.g., CRE concentration stress, single large counterparty default). Reverse stress test: Work backwards — what scenario causes the bank to fail? (Required in UK by PRA; useful management discipline globally)
For each scenario year (typically 3 years): Opening CET1 capital (M)
Credit RWA: Increases as Stage 3 NPLs grow (150% risk weight) and downgrades shift exposures to higher risk weight buckets. Typical severe scenario: credit RWA +10-15% Market RWA: Increases as ES/VaR models expand with higher volatility. Typical severe scenario: market RWA +30-50% Operational RWA: Increases as conduct/AML losses feed into Business Indicator. Typical severe scenario: operational RWA +5-10%
Asset-sensitive banks (more assets than liabilities repricing in 12 months): Benefit from initial rate rise; hurt by subsequent rate fall Liability-sensitive banks (more liabilities than assets repricing): Hurt by initial rate rise; benefit from subsequent rate fall IRRBB (Interest Rate Risk in the Banking Book) stress: typically +/- 200bp parallel shift, +300bp steepening, -200bp flattening. Load jurisdiction overlay for specific IRRBB scenarios required by the relevant regulator.
| Line Item | Base Y1 | Base Y2 | Base Y3 | Severe Y1 | Severe Y2 | Severe Y3 |
|---|---|---|---|---|---|---|
| Opening CET1 capital (M) | ||||||
| + Net interest income | ||||||
| + Non-interest income | ||||||
| - Operating expenses | ||||||
| = Pre-provision profit | ||||||
| - Credit losses (ECL charge) | ||||||
| - Tax | ||||||
| - Dividends and AT1 coupons | ||||||
| +/- OCI movements | ||||||
| = Closing CET1 capital (M) | ||||||
| RWA (M) | ||||||
| CET1 Ratio (%) | ||||||
| Distance to 4.5% minimum (pp) | ||||||
| Distance to MDA trigger (pp) |
At each stress year-end, calculate: Distance to hard CET1 minimum (4.5%): Stressed CET1 - 4.5% Distance to combined buffer requirement: Stressed CET1 - [4.5% + CCB + CCyB + surcharge] Distance to MDA trigger: Same as combined buffer requirement Going concern test: Is CET1 above 4.5% at all times? If not: plan capital actions.
Permitted in base case, restricted in severe scenario (per regulator instructions):
Regulators assess management actions for credibility under stress:
| Action | Credible in Adverse? | Credible in Severe? | Notes |
|---|---|---|---|
| Dividend cut/suspension | Yes | Yes (mandatory if MDA breached) | Expected action |
| AT1 coupon suspension | Yes | Yes (mandatory if MDA breached) | Legal discretion |
| Asset disposal | Yes | Unlikely (fire sale prices) | Haircut assumed proceeds |
| Rights issue | Possible | No (market access lost) | Investors unavailable |
| RWA reduction | Yes | Limited (pipeline committed) | 6-12 month lag |
The ICAAP is submitted to the regulator (PRA, ECB, APRA, etc.) annually. It must be: approved by the Board; prepared with independent review (CRO, Finance, Audit); consistent with financial plan and IFRS 9 ECL assumptions; stress scenarios materially more severe than the base case.
Required by PRA (UK) and increasingly by other regulators. Process: Start from a point of failure (e.g., CET1 breaches 4.5%). Work backwards to identify which scenario(s) could cause this outcome. Assess plausibility of those scenarios. Identify mitigants and recovery actions. Purpose: Not prediction — identification of the bank's most acute vulnerabilities and the triggers that management should monitor most closely.
| Programme | Jurisdiction | Frequency | Key Feature |
|---|---|---|---|
| ACS (Annual Cyclical Scenario) | UK (BoE/PRA) | Annual | Hurdle rates published; public disclosure |
| EBA Stress Test | EU (EBA/ECB) | Biennial | Static balance sheet; no capital threshold |
| DFAST (Dodd-Frank Act Stress Test) | US (Fed) | Annual | Severely adverse scenario; public disclosure |
| CCAR (Comprehensive Capital Analysis) | US (Fed) | Annual | Qualitative + quantitative; capital plan approval |
STRESS TEST SUMMARY
Entity: [Bank / Group name]
Assessment Date: [YYYY-MM-DD]
Scenarios: [Base / Adverse / Severe / Reverse]
CAPITAL DEPLETION — SEVERE SCENARIO:
Opening CET1 Ratio: [X.X%]
Year 1 CET1 Ratio: [X.X%] (distance to 4.5%: [+/-X.X pp])
Year 2 CET1 Ratio: [X.X%] (distance to 4.5%: [+/-X.X pp])
Year 3 CET1 Ratio: [X.X%] (distance to 4.5%: [+/-X.X pp])
Trough CET1 Ratio: [X.X%] in Year [N]
MDA breach: [Yes/No — in Year N]
KEY DRIVERS:
Cumulative credit losses: [Amount M]
RWA inflation: [Amount M] ([+X%])
NII impact: [Amount M]
MANAGEMENT ACTIONS ASSUMED:
[List with credibility assessment]
REVERSE STRESS TEST:
Failure scenario: [Description]
Plausibility assessment: [Low / Medium / High]
CONCLUSION:
Capital adequacy: [Adequate / Requires action]
Recommended buffer: [X.X% above minimum]
ALL OUTPUTS REQUIRE REVIEW BY A QUALIFIED PROFESSIONAL BEFORE USE IN REGULATORY FILINGS OR BUSINESS DECISIONS.