ICAAP Aggregation Cycle
The SAS Stress Testing provides the sample workflow template ST_ICAAP_Aggregation_Cycle to support the Internal Capital Adequacy Assessment Process (ICAAP) aggregation needs. This workflow guides users through three main phases: data processing, risk aggregation, and sign-off.In the data processing phase, the workflow includes two subtasks: preparing the analysis data and reviewing the loss summary data. If the data is not satisfactory, users can return to the preparation step before proceeding. The risk aggregation phase also consists of two subtasks: running the aggregation model on the analysis data to produce capital estimates and reviewing the results. If the outcomes are not acceptable, users can rerun the aggregation before continuing. Finally, the sign-off phase allows users to mark the cycle as complete or reject the results and return to the initial preparation phase if needed.To support this ICAAP cycle, SAS provides sample content, including configuration sets, input data (such as loss summaries and correlation matrices), aggregation models, and a report. This structure enables institutions to meet regulatory requirements by systematically aggregating and reviewing capital adequacy. Detailed instructions can be found in the SAS Stress Testing: User’s Guide under the section "Completing the Sample ICAAP Aggregation Cycle.
Learn more.
SPOTLIGHT USE CASE
ICAAP Aggregation Cycle
A financial institution needs to assess whether it holds sufficient capital to cover all material risks under both normal and stressed conditions, as required by regulatory guidelines. To support this, the institution performs ICAAP aggregation using SAS Stress Testing.The process begins with the preparation of risk data, including loss summaries and correlation matrices, which represent the relationship between various risk types. The data is processed and validated to ensure it meets the quality standards needed for reliable analysis. Once the data is ready, the institution runs an aggregation model that combines different risk components—such as credit risk, market risk, and operational risk—into a single capital requirement figure.The results of the aggregation are reviewed to evaluate capital adequacy and identify any capital shortfalls. If the aggregated results are not satisfactory, adjustments are made to the data or model parameters, and the aggregation is re-run. Once the institution is confident in the accuracy and robustness of the results, the ICAAP cycle is formally signed off and documented for internal decision-making and regulatory reporting.This use of ICAAP aggregation helps the institution ensure it is adequately capitalized and able to withstand adverse economic conditions, thereby supporting sound risk management and regulatory compliance.
TIP OF THE MONTH
Git Repository Management Page
A financial institution regularly develops and updates custom risk models and scripts to meet evolving regulatory and business requirements. To streamline version control and collaboration among risk analysts and developers, the administrator uses the Git Repository Management page within the SAS environment.
Instead of storing code in a local persistent volume, the administrator links the institution’s secure Git repository directly to the SAS code library. This setup allows modelers to seamlessly access, execute, and update custom scripts and models as part of the stress testing or economic capital analysis cycle.
By managing code centrally through Git, the institution ensures better traceability, change control, and alignment with software development best practices—while also reducing manual deployment efforts.
