IMF-LSE Symposium on “Macroprudential Stress Tests and Policies: A Framework”
IMF News, December 15, 2016
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- IMF-LSE Symposium on “Macroprudential Stress Tests and Policies: A Framework”
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Bibliographic details
- Published: December 15, 2016
Context and purpose
- Opening remarks by IMF Deputy Managing Director Tao Zhang on December 15, 2016.
- Symposium organized by the Monetary and Capital Markets Department of the IMF and the Systemic Risk Centre of the London School of Economics, with participation from several central banks, financial authorities, and academics.
- Objective: start an IMF–LSE research agenda to advance a global perspective on stress tests and macroprudential policies.
Reference to the global financial crisis
- The 2008 events demonstrated the speed and magnitude at which contagion could spread through financial systems.
- The fall of Lehman Brothers illustrated how relatively small initial losses could be amplified to systemic proportions with severe consequences for ordinary citizens and the collective good.
Three key contributions of well-designed stress tests
- Stress tests offer a quantitative, forward-looking assessment of the resilience of the financial system.
- In particular, they can detect potential contagion effects across institutions and markets.
- Stress tests can identify macrofinancial vulnerabilities.
- Stress tests can generate useful information for risk management and decision-making in times of financial stress.
Three priority areas requiring specific attention for integrating stress testing into macroprudential tools
- Analytics:
- The improvement of databases and secure access to them;
- The continued focus on modeling contagion losses, and stress-testing, across entities and markets in countries;
- The need to emphasize a global framework that acknowledges the fact that countries are becoming more and more integrated.
- Evolution of policy tools:
- Developing tools that are timely, and can handle systemic risk adequately;
- Instruments that are properly calibrated so that policy can be deployed effectively.
- Governance and accountability:
- Emphasizing accountability is crucial to the credibility and robustness of stress-tests and macroprudential tools.
IMF role and next steps
- The IMF is strongly committed to contributing to better stress test frameworks, particularly in integrating stress testing into the design of macroprudential tools.
- The Fund will share lessons from research and operational experience, including Financial Sector Assessment Programs, technical assistance missions, and multilateral surveillance projects.
- Closing sentiment: best wishes for very productive discussions over the next two days.
Source: IMF opening remarks by Tao Zhang, December 15, 2016.