Central Bank Stress Testing—Guidance Note
Policy Papers, December 23, 2024
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- Central Bank Stress Testing—Guidance Note
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Bibliographic details
- Published: December 23, 2024
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9798400297779.007
Overview
- Publication date: December 23, 2024.
- Core focus: Risks arising from the expansion of central bank balance sheets following the Global Financial Crisis and the COVID-19 pandemic.
- Central message: While balance sheet expansion has been essential for price stability and financial stability when traditional policy tools were insufficient, it introduces significant balance sheet risks that require careful management. The guidance note introduces a modeling framework to assess these risks and to guide capital policy.
- Suggested area for further exploration: The relationship between balance sheet size and economic outcomes.
Key findings
- Central banks took unprecedented measures to ensure price stability and financial stability when traditional policy tools were insufficient.
- Expansion of central bank balance sheets has led to significant balance sheet risks and notable losses as central banks adjusted policies in response to rising inflation.
- The proposed modeling framework is a valuable tool for assessing balance sheet risks and guiding capital policy.
Modeling framework and analytical contribution
- Purpose: Assess balance sheet risks and inform capital policy.
- Expected benefit: Provide a structured methodology to evaluate how balance sheet size and composition affect central bank financial outcomes and resilience.
- Analytical emphasis: Linking balance sheet size and economic outcomes as a potential avenue for further insights into central bank strategies.
Policy implications and recommendations
- Balance sheet expansion, while essential in certain conditions, requires careful risk management and capital policy guidance.
- Use stress-testing and the proposed modeling framework to:
- Identify balance sheet vulnerabilities arising from asset exposures and yield curve movements.
- Inform decisions on central bank equity, transfers, and public financial management (PFM) considerations.
- Guide forecasting of balance sheet dynamics under alternative macro-financial scenarios.
Key statistics, identifiers, and metadata (preserved exactly)
- Pages: 58
- Volume: 2024
- Issue: 067
- Series: Policy Paper No. 2024/067
- Stock No: PPEA2024067
- DOI: https://doi.org/10.5089/9798400297779.007
- ISBN: 9798400297779
- ISSN: 2663-3493
- Preview Citation (format: Chicago): International Monetary Fund. Monetary and Capital Markets Department "Central Bank Stress Testing—Guidance Note", Policy Papers 2024, 067 (2024), accessed 8/21/2026, https://doi.org/10.5089/9798400297779.007
Subjects and keywords (preserved exactly)
- Subject: Central bank balance sheet, Central bank policy rate, Central banks, Financial services, Financial statements, International reserves, Public financial management (PFM), Yield curve
- Keywords: balance sheet, balance sheet action, balance sheet risk, Central bank, Central bank balance sheet, central bank bank transfer, central bank equity, Central bank policy rate, central bank profit, Financial statements, forecasting balance sheet, Global, International reserves, stress testing, Yield curve
International Monetary Fund. Central Bank Stress Testing—Guidance Note. Policy Paper No. 2024/067 (December 23, 2024).
Content in this bundle
- Policy Paper