Belgium: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis and Stress Testing
IMF Staff Country Reports, December 8, 2023
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Bibliographic details
- Published: December 8, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400262456.002
Overview and scope
- Publication date: December 8, 2023
- Pages: 116
- Volume: 2023
- Issue: 393
- Series: Country Report No. 2023/393
- DOI: https://doi.org/10.5089/9798400262456.002
- Stock No: 1BELEA2023011
- ISBN: 9798400262456
- ISSN: 1934-7685
- Subject tags: Financial institutions; Financial sector policy and analysis; Insurance companies; International organization; Monetary policy; Mutual funds; Solvency; Solvency stress testing; Stress testing
- Keywords included: Global; H. sensitivity analysis; Insurance companies; market interconnectedness flowchart; market interconnectedness Results; Mutual funds; net interest income; regressions output; risk projection; sensitivity analysis result; Solvency; solvency capital requirement; Solvency stress testing; Stress testing
Main findings — solvency and stress testing
- FSAP banks solvency stress tests show that the Belgian significant institutions are resilient under the adverse scenario while some heterogeneity exists.
- A sensitivity analysis was conducted converting non-term deposits to term deposits owing to the steep surge in interest rates.
- An additional study examining the interplay between solvency and liquidity risks under stress shows that banks are resilient to shocks that will result in forced liquidation of assets.
Main findings — liquidity and interconnectedness
- Liquidity stress tests results show that liquidity levels are comfortable for the system but need to be reinforced for some banks.
- Interconnectedness analyses show that Belgian domestic and cross-border interconnections are relatively modest.
- The domestic interbank market reflects low levels of contagion risks for Belgian banks; however, there are a few banks that exhibit a high degree of systemic importance within the interbank system.
- Cross-border analysis reveals Belgian banks’ strong exposures to non-financial sectors.
Implications and areas for attention
- Continue monitoring heterogeneity in solvency vulnerabilities across significant institutions despite overall resilience under the adverse scenario.
- Assess and reinforce liquidity positions for individual banks identified as needing reinforcement.
- Monitor deposit structure shifts (conversion of non-term deposits to term deposits) driven by interest rate changes and their implications for both liquidity and net interest income.
- Track banks with high systemic importance in the domestic interbank market to mitigate potential concentrated contagion channels.
- Consider the risks from strong cross-border exposures to non-financial sectors in cross-border stress-testing and macroprudential surveillance.
International Monetary Fund. Monetary and Capital Markets Department "Belgium: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis and Stress Testing", IMF Staff Country Reports 2023, 393 (2023).
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