Sweden: Financial Sector Assessment Program-Technical Note-Stress Testing

IMF Staff Country Reports, October 5, 2017

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Canonical URL: Sweden: Financial Sector Assessment Program-Technical Note-Stress Testing

This Technical Note explains the stress testing approach of the 2016 Financial Sector Assessment Program in assessment of risk in the Swedish financial sector and provides the results of the tests.
Stress tests covered three major segments of the domestic financial sector.
The resilience of the Swedish banking system was tested against solvency, liquidity, and contagion risks.
Key high-level findings:
- The solvency stress test suggests that banks would be resilient to severe economic distress.
- Bank liquidity stress tests suggest that banks could withstand severe funding and market liquidity shocks, but there are pockets of vulnerability.
- The overall stress testing exercise suggests that there is room for improvement in the individual components of authorities’ stress testing framework.

Covered three major segments of the domestic financial sector.
Risk dimensions assessed:
- Solvency risk.
- Liquidity risk (funding and market liquidity).
- Contagion risk.

Solvency:
- Solvency stress test results indicate resilience of banks to severe economic distress.
Liquidity:
- Bank liquidity stress tests indicate banks could withstand severe funding and market liquidity shocks.
- There are pockets of vulnerability in bank liquidity positions.
Contagion:
- Contagion risk was included as a central element of the assessment (specific contagion results are reported in the Technical Note).

The overall exercise indicates room for improvement in the individual components of the authorities’ stress testing framework.

Publication title: Sweden: Financial Sector Assessment Program-Technical Note-Stress Testing
Publication date: October 5, 2017
Series: Country Report No. 2017/309
Issue: 309
Volume: 2017
Pages: 93
DOI: https://doi.org/10.5089/9781484322475.002
ISBN: 9781484322475
ISSN: 1934-7685
Subjects: Banking; Credit; Financial institutions; Financial sector policy and analysis; Money; Mutual funds; National accounts; Personal income; Solvency stress testing; Stress testing
Keywords: asset class; balance sheet; Baltics; cash flow; CR; Credit; current yield; forward rate; Global; interest income; investment funds; ISCR; long-dated investment assets; market value; Mutual funds; net income; Personal income; Solvency stress testing; sovereign bond; stress scenario; Stress testing; Swedish krona

IMF Staff Country Reports — "Sweden: Financial Sector Assessment Program-Technical Note-Stress Testing", October 5, 2017.