The IIA Releases Updated Practice Guide on Capital Adequacy and Stress Testing

The IIA’s newly updated practice guide, “Auditing Capital Adequacy and Stress Testing for Banks, 2^nd Edition,” explores internal audit’s role in evaluating the capital planning and management process. This guide replaces the original version released in 2018.

Because regulators and banking supervisors hold financial institutions accountable to meet certain thresholds, including maintaining sufficient capital to handle changes in business cycles and global economic fluctuations, internal auditors in the financial services industry should understand the standards and principles of capital adequacy in the jurisdictions where their organizations operate.

This updated guide will enable internal auditors to:

• Understand capital requirement measures and language used in different jurisdictions, including the comprehension of regulatory capital versus economic capital.
• Identify changes in capital quality definitions.
• Understand the role of internal audit in assessing capital adequacy.
• Analyze strategies and methods in stress testing models.
• Evaluate risk appetite and capital requirements.

IIA members are invited to download this guidance and all guidance as a benefit of membership.

Take a Deeper Dive

Register for our upcoming webinar on Wednesday, August 10, 2:00-3:00 p.m. ET, when the importance of financial institutions having enough liquid assets to meet their near-term obligations is discussed. We will also consider the effect that credit, market, and operational risks have on capital planning processes and a brief look at the stress testing process. 

Visit The IIA’s Financial Services Resource Center for additional resources.

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