37. The use of appropriate methodologies in stress testing programmes is key to fulfilling their purposes. Whilst these guidelines do not prescribe methodologies, they are designed to enhance institutions' practices in stress testing, in particular by identifying the types of methodologies that should be considered by an institution in designing its stress testing programme proportionate to its size and complexity. In a general sense, an effective stress testing programme should consist of sensitivity analyses (single and simple multi-factor analyses) and scenario analyses addressing all material risks at various levels of the institution. The combination of approaches as well as the level of detail will depend on the size and complexity of the specific institution. A smaller institution may place greater emphasis on the qualitative elements of its stress testing programme supported by quantitative outputs of the balance sheet, whereas large sophisticated institutions would be expected to run complex models which would be complemented by appropriate qualitative oversight.

3.1 Sensitivity analysis

 Guideline 6. Institutions should perform sensitivity analyses for specific portfolios or risks.