Stress testing and model validation

What it is

An optional Marengo module that gives member-state financial supervisors and EU-level institutions an environment for two activities that are different in nature but mutually supportive:

• Supervisory stress-testing. Macroprudential scenario simulation across the whole financial system or a segment of it — e.g. response to a hypothetical interest-rate shock, activation of a contagion path, or the impact of a coordinated market-stress event on liquidity.
• Independent validation of bank risk models. Supervisory-level review of the risk models that banks submit (capital-requirement calculation, AML risk scoring, fraud models) using independent data and methodology — to confirm that the models deliver the stated accuracy on their own task.

How it fits with the rest of Marengo

The module is optional — Marengo's core (SFMA + MAR) does not depend on it. It is worth activating when the supervisor's mandate covers a macroprudential stress-testing programme (e.g. EBA EU-wide stress test, ECB SSM, ESRB) or the independent validation of banks' internal-model approach (e.g. IMA model reviews).

The module sits on the same Marengo operational base (Cross-Venue Intelligence, evidence- chain construction); stress-test simulations and model-validation results appear in the same auditable, explainable form as SFMA and MAR signals.

"We recommend — you decide"

The module produces quantitative analyses, sensitivity checks and validation reports. The supervisory conclusion, the public release of stress-test results and the formal finding sent to the bank stay entirely within the institutional mandate. This is consistent with the Marengo-wide "we recommend, you decide" principle and with the EU AI Act's human-oversight requirements.