Spain: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis
IMF Staff Country Reports, August 1, 2024
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Bibliographic details
- Published: August 1, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400284342.002
Overview
- Focus: technical note on systemic risk analysis as part of the Financial Sector Assessment Program (FSAP) in Spain.
- Context: Spain’s economy and its well-developed, bank-dominated financial system have shown resilience through the pandemic, rising global geo-political tensions and tighter financial conditions.
- Spanish banking sector characteristics: global imprint, traditional business model, and strong profitability.
- Downside risks are prominent and existing vulnerabilities could amplify the impact of exogenous shocks on financial stability.
Key findings
- The FSAP assessed the Spanish banking and real sectors’ resilience against a severe but plausible adverse scenario that reflects downside risks.
- The FSAP analysis suggests a moderate rise in the debt-at-risk of the nonfinancial corporates sector in the adverse scenario.
- Liquidity stress tests show that Significant banking institutions can:
- cope comfortably with market valuation shocks, and
- face cash flow challenges under large withdrawals of retail deposits.
- Interconnectedness analysis does not reveal significant vulnerabilities of Spanish banks to of cross-border contagion of foreign banking distress.
Stress testing and scenarios
- Scenario type: severe but plausible adverse scenario reflecting prominent downside risks and existing vulnerabilities.
- Nonfinancial corporates: moderate rise in debt-at-risk in the adverse scenario.
- Liquidity tests:
- Market valuation shocks: Significant banking institutions can cope comfortably.
- Large retail deposit withdrawals: Significant banking institutions would face cash flow challenges.
Interconnectedness analysis
- Conclusion: no significant vulnerabilities detected of Spanish banks to cross-border contagion of foreign banking distress.
Subjects and keywords
- Subject: Credit, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Income, Liquidity requirements, Loans, Money, National accounts, Stress testing
- Keywords: banking sector asset composition, banking sector asset quality, Caribbean, Credit, D. liquidity-solvency interaction, Global, IMF approach, Income, Liquidity requirements, Loans, NFC liquidity, solvency stress test result, Stress testing
Content in this bundle
- Spain FSAP