Top-down stress testing is one way of assessing the resilience of the financial system to the risks it might face now, or in the future. And by considering a range of different risks, top-down stress testing can also provide an indication of the key vulnerabilities of the system. The Bank of England’s Risk Assessment Model of Systemic Institutions (RAMSI) is an example of a top-down stress-testing model and is one part of the Bank’s risk assessment toolkit. This paper offers an overview of RAMSI and provides, by way of illustration, a detailed description of its implementation as part of the comprehensive set of stress tests carried out during the IMF’s 2011 UK Financial Sector Assessment Program (FSAP).
RAMSI: a top-down stress-testing model
By Oliver Burrows, David Learmonth and Jack McKeown