Australia: Financial Sector Assessment Program-Technical Note-Stress Testing the Banking Sector and Systemic Risk Analysis

February 21, 2019

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Format: Chicago

Australia: Financial Sector Assessment Program-Technical Note-Stress Testing the Banking Sector and Systemic Risk Analysis, (USA: International Monetary Fund, 2019) accessed October 6, 2024

Summary

This technical note describes the financial stability analysis undertaken as part of the Financial Sector Assessment Program that primarily focuses on assessing the resilience of the banking system. Bank solvency appears relatively resilient to stress, although liquidity stress tests reveal some vulnerabilities given continued reliance on wholesale funding. The systemic risk analysis reveals a low degree of interconnectedness between the largest Australian banks and their global counterparts. However, the cross-border and interbank exposures data corroborates the systemic importance of the four largest banks and the view that the Australian banks are particularly vulnerable to external funding shocks. Cross-border analysis using country-level and individual bank-level supervisory data corroborates the view that the Australian banks are particularly vulnerable to external funding shocks given their dependence on wholesale funding from overseas. Policy recommendations made in the note include that additional investment in data and analytical tools would strengthen financial supervision and systemic risk oversight.

Subject: Banking, Commercial banks, Currencies, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Liquidity requirements, Money, Mortgages, Stress testing

Keywords: Australian bank, Bank bill, Bank capital level, Bank network analysis, Bank-NFC linkage, Banks' funding maturity profile, Benchmark bank, Capital level, Cash inflow, Commercial banks, Consolidated Cross-Border Claims, CR, Currencies, Funding maturity profile, Funding shock, Global, ISCR, Liquidity requirements, Long-term debt, Mid-sized bank, Mortgages, Network analysis, Off-balance sheet assets, Risk analysis, Sensitivity analysis, Stress testing, Wholesale funding

Publication Details

Pages:

66
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2019/051
Stock No:

1AUSEA2019004
ISBN:

9781484398920
ISSN:

1934-7685

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