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Scenario analysis is essential for the Internal Capital Adequacy Assessment Process

The Internal Capital Adequacy Assessment Process (ICAAP) is a process through which financial institutions assess their regulatory Pillar II capital. During this process, institutions identify and evaluate the risks that are relevant to the nature of their business, allowing them to have a clearer view of their strengths and weaknesses. In recent years regulators have stressed the importance of scenario analysis and ICAAP, and they have highlighted the benefits of integrating this process into the management framework of institutions.