Stress Testing at the IMF

By Tobias Adrian, James Morsink, Liliana B Schumacher

February 5, 2020

Preview Citation

Format: Chicago

Tobias Adrian, James Morsink, and Liliana B Schumacher. Stress Testing at the IMF, (USA: International Monetary Fund, 2020) accessed June 18, 2025

Disclaimer: The views expressed herein are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.

Subject: Banking, Financial Sector Assessment Program, Financial sector policy and analysis, Financial sector stability, Solvency, Solvency stress testing, Stress testing, Systemic risk

Keywords: Bank, Bank capital, Bank exposure, Cash flow, Counterbalancing capacity, Defaults affect bank asset value, DP, DPPP, Financial Sector Assessment Program, Financial sector stability, Funding cost, Global, IMF Library, IMF solvency stress tests, IMF staff, IMF stress tests, IMF team, Optimization process, Risk amplification mechanism, Share price, Solvency, Solvency factor, Solvency stress testing, Stress testing, Stress tests, Systemic risk

Publication Details

Pages:

72
Volume:

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DOI:

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Issue:

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Series:

Departmental Paper No 2020/016
Stock No:

STIMFEA
ISBN:

9781513520742
ISSN:

2616-5333

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