Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks
IMF Staff Country Reports, March 5, 2024
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Bibliographic details
- Published: March 5, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400268199.002
Overview
- Technical note assessing systemic risks and vulnerabilities for banks in Botswana conducted in the aftermath of the coronavirus disease 2019 pandemic.
- Assessment based on stress tests that simulate bank health under a severe yet plausible adverse scenario including global and domestic inflationary pressures, monetary policy tightness, and a major slowdown of economic activity.
Stress test scenario and assumptions
- Scenario elements:
- Global and domestic inflationary pressures.
- Monetary policy tightness.
- A major slowdown of economic activity.
- Purpose: to evaluate resilience of banks under severe but plausible macro-financial stresses.
Coverage and methodology
- Coverage:
- The exercises covered eight commercial banks as of June 2022.
- Types of stress test exercises performed:
- Top-down solvency stress test.
- Liquidity stress test.
- Contagion and interconnectedness stress test (focused on domestic banking interconnectedness).
Key findings and statistics
- Overall assessment:
- The financial system appears resilient to a wide range of shocks.
- Solvency results:
- Solvency stress tests identify small capital shortfalls in two banks under the adverse scenario.
- Liquidity and contagion:
- A dedicated liquidity stress test was performed.
- Contagion and interconnectedness stress test focused on domestic banking interconnectedness.
Policy recommendations
- Recommended actions for the Bank of Botswana:
- Introduce macro and micro level stress tests based on a multiperiod scenario analysis.
- Develop its framework to assess interest rate risk in the banking book.
Source: IMF Staff Country Report — "Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks" (March 5, 2024).
Content in this bundle
- 1bwaea2024005 - Executive Summary