Title[ Part 3: The Second Pillar - Supervisory Review Process
Section[ Principle 2: 2. Assessment of capital adequacy
749. Supervisors should review the bank’s processes to determine that:
w Target levels of capital chosen are comprehensive and relevant to the current operating environment;
w These levels are properly monitored and reviewed by senior management; and
w The composition of capital is appropriate for the nature and scale of the bank’s business.
750. Supervisors should also consider the extent to which the bank has provided for unexpected events in setting its capital levels. This analysis should cover a wide range of external conditions and scenarios, and the sophistication of techniques and stress tests used should be commensurate with the bank’s activities.
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