People’s Republic of China–Hong Kong Special Administrative Region: Financial Sector Assessment Program-Stress Testing the Banking Sector-Technical Note
IMF Staff Country Reports, July 16, 2014
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Bibliographic details
- Published: July 16, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498322638.002
Overview
- Technical Note prepared in the context of the Financial Sector Assessment Program (FSAP) for the People’s Republic of China–Hong Kong Special Administrative Region (HKSAR).
- Focus: stress testing the banking sector, with particular emphasis on bank liquidity tests addressing sudden, sizable withdrawals of funding and the sufficiency of existing assets to withstand those shocks under stressed conditions.
Key Findings
- Stress test results confirm a high degree of resilience of the sector.
- Resilience reflects the strength of banks at the starting position, reducing their fundamental vulnerability to shocks.
- Banks in HKSAR:
- Hold very high levels of capital.
- Are very profitable.
- Have a low level of asset impairments.
- Exhibit stable funding profiles.
Stress Test Design and Supervisory Practice
- Bank liquidity tests concentrate on:
- Sudden, sizable withdrawals of funding.
- Sufficiency of existing assets to meet liquidity needs under stressed conditions.
- The Hong Kong Monetary Authority is encouraged to continue integration of risk-based supervision into the development of stress test scenarios for:
- Macroprudential policy.
- Surveillance.
- Banking supervisors routinely conduct stress tests and periodically modify relevant assumptions to support thematic reviews of identified vulnerabilities against emerging risks.
Policy Recommendations
- Continue integrating risk-based supervision into stress test scenario development for macroprudential policy and surveillance.
- Maintain routine stress-testing practices and adapt assumptions periodically to reflect and assess emerging risks and identified vulnerabilities.
Source: People’s Republic of China–Hong Kong Special Administrative Region: Financial Sector Assessment Program-Stress Testing the Banking Sector-Technical Note (July 16, 2014).