United Kingdom: Financial Sector Assessment Program-The Bank of England’s Stress Testing Framework-Technical Note
IMF Staff Country Reports, June 17, 2016
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- United Kingdom: Financial Sector Assessment Program-The Bank of England’s Stress Testing Framework-Technical Note
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Bibliographic details
- Published: June 17, 2016
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781475528558.002
Overview
- Discusses the Bank of England’s (BoE’s) stress testing program, with emphasis on the concurrent stress test and consideration of stress testing done by banks through the Internal Capital Adequacy Assessment Process (ICAAP).
- Purpose: generate information on potential vulnerabilities of the system to emerging and growing risks, both financial and in the real economy.
- Main purpose of the stress-testing framework: provide a forward-looking, quantitative assessment of capital adequacy of the U.K. banking system as a whole, and of individual institutions within it.
Evaluation framework
- The stress-testing program is evaluated along five dimensions:
- Scope of coverage
- Scenario design
- Analytical infrastructure
- Disclosure
- Governance
Key findings and emphases
- Stress tests are intended to identify potential system-wide and institution-specific vulnerabilities.
- The report focuses primarily on the Bank of England’s concurrent stress test while also considering banks’ internal stress testing via ICAAP.
- Emphasis on forward-looking, quantitative assessment of capital adequacy rather than solely retrospective analysis.
Subject areas and technical focus
- Subject topics covered in the paper include:
- Banking
- Capital adequacy requirements
- Countercyclical capital buffers
- Financial regulation and supervision
- Financial sector policy and analysis
- Financial sector stability
- Financial statements
- Public financial management (PFM)
- Stress testing
- Keywords reflecting analytical components and scope:
- bank projection, bank specific, banking system, banks in the U.K., BoE staff, BoE's model, BoE's stress
- Capital adequacy requirements, capital position, Countercyclical capital buffers, CR, custody bank
- Financial sector stability, Financial statements, Global, governance process, ISCR, PRA buffer
- reference date, stress test, Stress testing, U.K. financial system, U.K. subsidiary
Intended users and utility
- Useful for policymakers and supervisors interested in:
- Assessing system-wide and firm-level capital adequacy under stress
- Designing and evaluating stress-test scenarios
- Strengthening analytical infrastructure for stress testing
- Improving disclosure and governance around stress-testing programs
International Monetary Fund. "United Kingdom: Financial Sector Assessment Program-The Bank of England’s Stress Testing Framework-Technical Note", June 17, 2016.
Content in this bundle
- _cr16162 — Executive Summary