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

By Andreas Jobst, Li L Ong, Christian Schmieder

March 13, 2013

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Andreas Jobst, Li L Ong, and Christian Schmieder. A Framework for Macroprudential Bank Solvency Stress Testing: Application to S-25 and Other G-20 Country FSAPs, (USA: International Monetary Fund, 2013) accessed September 19, 2024

Disclaimer: This Working 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 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.

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

Keywords: Bank solvency, Bank solvency risk, Basel III, Bottom-up bank solvency stress test output template, Financial Sector Assessment Plan (FSAP), Financial Sector Assessment Program, FSAP solvency stress tests, G-20, Global, Hurdle rate, IMF balance sheet approach, IMF staff, IMF team, Macroprudential, Market price, Output template, Risk horizon, S-25, Satellite models, Sensitivity analysis, Solvency, Solvency stress testing, Stress test output template, Stress test summary template, Stress testing, Surveillance, U.K. FSAP update, WP

Publication Details

Pages:

55
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/068
Stock No:

WPIEA2013068
ISBN:

9781616355074
ISSN:

1018-5941

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