New Zealand: Financial Sector Assessment Program: Technical Note-Stress Testing the Banking Sector and Systemic Risk Analysis
May 10, 2017
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This Technical Note discusses the results of stress testing of the banking sector and systemic risk analysis for New Zealand. The banking sector, which dominates the financial system, has significant exposure to real estate. A sharp decline in the real estate market, a prolonged period of low dairy prices, deterioration in global economic conditions, and a tightening in financial markets would adversely impact the system. Despite these risks, the banking system is resilient to severe shocks. Results of stress tests and sensitivity analysis indicate that the solvency and liquidity of the banking system can withstand adverse and severe shocks.
Subject: Banking, Commercial banks, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Financial Sector Assessment Program, Financial sector policy and analysis, Loans, Money, Stress testing
Keywords: asset buffer, bank default, bank liability, banking system, Commercial banks, CR, Credit, Credit risk, credit risk parameter, defaulted bank, disclosure statement, funding cost, funding pressure, Global, interest rate, ISCR, Loans, LTV bucket, New Zealand bank, securities portfolio, stress test, stress test result, Stress testing
Pages:
79
Volume:
2017
DOI:
Issue:
119
Series:
Country Report No. 2017/119
Stock No:
1NZLEA2017007
ISBN:
9781475599923
ISSN:
1934-7685
