[This section should be read in conjunction with the CEBS Guidelines on aspects of the management of concentration risk under the supervisory review process.]

Applicable to all institutions

1. Considerations affecting concentration risk (both intraand inter-risk) are an important part of the stress testing framework, since stress tests can be helpful in revealing interrelationships between risk drivers and their impact on an institution under adverse economic conditions.

2. Stress testing is a key tool in the identification of concentration risk. Such analysis, like concentration risk management, is most useful when it is performed on an institution-wide basis and is able to transcend business unit or risk type focus on concentrations, to which it can be a useful complement.

3. In addition, stress testing would allow institutions to identify interdependencies between exposures, which may only become apparent in stressed conditions as well as hidden concentrations, even though the probability of such adverse scenarios is significantly low.

4. In stress testing, especially firm-wide stress testing, institutions could identify risk concentrations taking into account single risk concentrations and interrelated risk types considering onand off-balance sheet exposures, as well as banking, trading and hedging positions.