2.1 A firm must carry out an ICAAP in accordance with the PRA’s ICAA rules. These include requirements on the firm to assess on an ongoing basis the amounts, types and distribution of capital that it considers adequate to cover the level and nature of the risks to which it is or might be exposed. This assessment should cover the major sources of risks to the firm’s ability to meet its liabilities as they fall due, and should incorporate stress testing and scenario analysis. If a firm is merely attempting to replicate the PRA’s own methodologies, it will not be carrying out its own assessment in accordance with the ICAA rules. The ICAAP should be documented and updated annually by the firm, or more frequently if changes in the business, strategy, nature or scale of its activities or operational environment suggest that the current level of financial resources is no longer adequate.

2.2 The PRA expects firms, in the first instance, to take responsibility for ensuring that the capital they have is adequate, with the ICAAP being an integral part of meeting this expectation. The PRA expects an ICAAP to be the responsibility of a firm’s management body, that it is approved by the management body, and that it is used as an integral part of the firm’s management process and decision making. The processes and systems used to produce the ICAAP should ensure that the assessment of the adequacy of a firm’s financial resources is reported to its management body as often as is necessary.