20.1 In order to be satisfied that the credit risk stress test undertaken by a firm pursuant to Article 177(2) of the Credit Risk: Internal Ratings Based Approach (CRR) Part is meaningful and that it considers the effects of severe, but plausible, recession scenarios, the PRA expects that the stress test is based on an economic cycle that is consistent with SS31/15 - The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP).

20.2 The level of cyclicality assumption used in calculating the long-run average PD for residential mortgages referred to in paragraph 11.38 above should not be relied on when undertaking the credit risk stress test required under Article 177(2) of the Credit Risk: Internal Ratings Based Approach (CRR) Part and the PRA expects firms to consider the possibility that the model proves more cyclical than anticipated.