Mapping Financial Sector Vulnerability in a Non-Crisis Country

By Inci Ötker, Patrick Downes, Dewitt D Marston

May 1, 1999

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Inci Ötker, Patrick Downes, and Dewitt D Marston. Mapping Financial Sector Vulnerability in a Non-Crisis Country, (USA: International Monetary Fund, 1999) accessed September 19, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The forward-looking framework expounded in this paper links a qualitative evaluation of system-wide vulnerability (covering macro, sectoral, institutional, and systemic liquidity issues) with a quantitative assessment of the financial condition of significant financial institutions. Based on vulnerability criteria and judgmental stress tests, twelve indicators of soundness (measuring risk exposure, solvency, liquidity, profitability, and supervisory assessment) are developed. This holistic methodology can be used not only as an early warning/crisis-avoidance system to identify potential systemic problems—and problem institutions—requiring immediate attention, but also to pinpoint needed reforms in the legal, regulatory, and institutional infrastructure that can lessen the likelihood of a future crisis.

Subject: Banking, Capital adequacy requirements, Financial statements, Solvency, Stress testing

Keywords: Balance sheet data, Bank, Bank assets, Financial condition, PDP, Problem bank

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 1999/004
Stock No:

PPIEA0041999
ISBN:

9781451973433
ISSN:

1564-5193

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