Belgium: Financial System Stability Assessment-Technical Note- Stress Testing the Banking and Insurance Sectors and Systemic Risk Analysis
IMF Staff Country Reports, March 8, 2018
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Bibliographic details
- Published: March 8, 2018
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484345870.002
Summary findings
- The Technical Note discusses results of stress testing of Belgium’s banking and insurance sectors.
- Belgium’s financial sector remains resilient in the face of the rising cyclical vulnerabilities, but there is a need for closely monitoring risks.
- Stress tests confirm that banks and insurance companies can absorb credit, sovereign, and market losses in the event of a severe deterioration in macro-financial conditions.
- All banks meet minimum capital requirements and none needs to draw down its capital conservation buffer over the stress horizon.
- The risk of interbank contagion through direct exposures is low.
- Insurance companies are generally resilient; losses in the stress scenarios by insurers that belong to banking groups do not threaten the soundness of those groups.
Stress testing results for banks
- Banks can absorb credit, sovereign, and market losses under severe macro-financial stress scenarios.
- All banks meet minimum capital requirements over the stress horizon.
- No bank needs to draw down its capital conservation buffer over the stress horizon.
- Interbank contagion risk through direct exposures assessed as low.
Stress testing results for insurance companies
- Insurance companies are generally resilient to the modeled stress scenarios.
- Losses incurred by insurance companies that belong to banking groups do not threaten the soundness of those banking groups.
Systemic risk and contagion analysis
- Direct interbank exposures imply a low risk of contagion through direct links.
- Banking-group affiliation of some insurance companies does not produce systemic threat to those groups under the stress scenarios analyzed.
Policy implications and monitoring
- Continued close monitoring of rising cyclical vulnerabilities in Belgium’s financial sector is warranted.
- Maintain supervisory attention on credit, sovereign, and market risk channels tested in the stress scenarios.
- Monitor capital positions to ensure banks continue to meet minimum requirements and preserve the capital conservation buffer over the stress horizon.
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