IMF Working Papers

A Framework for Macroprudential Bank Solvency Stress Testing: Application to S-25 and Other G-20 Country FSAPs

Author/Editor:

Andreas Jobst ; Li L Ong ; Christian Schmieder

Publication Date:

March 13, 2013

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Link to data for this title

Summary:

The global financial crisis has placed the spotlight squarely on bank stress tests. Stress tests conducted in the lead-up to the crisis, including those by IMF staff, were not always able to identify the right risks and vulnerabilities. Since then, IMF staff has developed more robust stress testing methods and models and adopted a more coherent and consistent approach. This paper articulates the solvency stress testing framework that is being applied in the IMF’s surveillance of member countries’ banking systems, and discusses examples of its actual implementation in FSAPs to 18 countries which are in the group comprising the 25 most systemically important financial systems (“S-25”) plus other G-20 countries. In doing so, the paper also offers useful guidance for readers seeking to develop their own stress testing frameworks and country authorities preparing for FSAPs. A detailed Stress Test Matrix (STeM) comparing the stress test parameters applie in each of these major country FSAPs is provided, together with our stress test output templates.

Series:

Working Paper No. 2013/068

Subject:

Bank solvency Banking Basel III Financial regulation and supervision Financial Sector Assessment Program Financial sector policy and analysis Solvency stress testing Stress testing