People’s Republic of China–Hong Kong Special Administrative Region: Financial Sector Assessment Program-Stress Testing the Banking Sector-Technical Note

July 16, 2014

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People’s Republic of China–Hong Kong Special Administrative Region: Financial Sector Assessment Program-Stress Testing the Banking Sector-Technical Note, (USA: International Monetary Fund, 2014) accessed September 18, 2024

Summary

This Technical Note on Stress Testing the Banking Supervision was prepared in the context of the Financial Sector Assessment Program (FSAP) for the People’s Republic of China–Hong Kong Special Administrative Region (HKSAR). Bank liquidity tests focus on sudden, sizable withdrawals of funding and the sufficiency of existing assets to withstand those shocks under stressed conditions. The stress test results confirm a high degree of resilience of the sector. This reflects the strength of the banks at the starting position, which reduces their fundamental vulnerability to shocks. Banks in HKSAR hold very high levels of capital, are very profitable, and have a low level of asset impairments amid stable funding profiles. The Hong Kong Monetary Authority is encouraged to continue its integration of risk-based supervision in the development of stress test scenarios for macroprudential policy and surveillance. Banking supervisors routinely conduct stress tests and, from time to time, modify relevant assumptions in order to support thematic reviews of identified vulnerabilities against emerging risks.

Subject: Banking, Basel III, Capital adequacy requirements, Commercial banks, Currencies, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Money, Solvency stress testing, Stress testing

Keywords: Asia and Pacific, Asset swap, Bank loan, Banking sector, Basel III, Capital adequacy ratio, Capital ratio, Commercial bank, Commercial banks, CR, Credit risk, Currencies, East Asia, Hurdle rate, ISCR, Price index, Put option, Solvency stress testing, Stress testing

Publication Details

Pages:

127
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2014/210
Stock No:

1HKGEA2014009
ISBN:

9781498322638
ISSN:

1934-7685

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