## Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks

_IMF Staff Country Reports, March 5, 2024_

## Source details

**Canonical URL:** [Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks](https://www.imf.org/en/publications/cr/issues/2024/03/05/botswana-financial-sector-assessment-program-technical-note-on-assessment-of-systemic-risks-545519)

## Other formats

- [Markdown version](/en/publications/cr/issues/2024/03/05/botswana-financial-sector-assessment-program-technical-note-on-assessment-of-systemic-risks-545519/index.md)
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## Bibliographic details
- Published: March 5, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400268199.002

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### 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).*

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## Content in this bundle

- **1bwaea2024005 - Executive Summary**
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  - [1bwaea2024005 - Executive Summary (PDF)](/-/media/files/publications/cr/2024/english/1bwaea2024005.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2024/03/05/botswana-financial-sector-assessment-program-technical-note-on-assessment-of-systemic-risks-545519_