Luxembourg: Financial Sector Assessment Program: Technical Note-Risk Analysis

IMF Staff Country Reports, August 28, 2017

Source details

Canonical URL: Luxembourg: Financial Sector Assessment Program: Technical Note-Risk Analysis

This Technical Note reviews the stability of Luxembourg’s financial system.
The financial system plays a key role in the intermediation of financial capital.

The financial soundness indicators for Luxembourg’s financial system have remained relatively robust in recent years.
Most banks have considerable cross-border exposure.

Household stress test results suggest that households’ solvency would be significantly affected by:
- a drop in income,
- a drop in housing prices, and
- a rise in unemployment.

Bank liquidity displays broad resilience.
Bank liquidity would be weakened should wholesale funding dry up or funding stress emerge in foreign currencies.

Banks were found to be less vulnerable to direct contagion risk through bilateral exposure.
However, the prevalence of considerable cross-border exposure among most banks is a material vulnerability.

Subject: Banking, Commercial banks, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Liquidity requirements, Liquidity stress testing, Mutual funds, Stress testing
Keywords: bank, Commercial banks, CR, credit risk, Europe, foreign exchange, Global, hurdle rate, interest rate, investment fund industry, investment fund liquidity risk, ISCR, liquidity, Liquidity requirements, liquidity shortfall, liquidity stress test result, Liquidity stress testing, liquidity stress tests, Mutual funds, quantitative analysis, sector stress tests, short-term debt, stress test result, Stress testing