Mapping Financial Sector Vulnerability in a Non-Crisis Country

Author/Editor:

Inci Ötker ; Patrick Downes ; Dewitt D Marston

Publication Date:

May 1, 1999

Electronic Access:

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Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The forward-looking framework expounded in this paper links a qualitative evaluation of system-wide vulnerability (covering macro, sectoral, institutional, and systemic liquidity issues) with a quantitative assessment of the financial condition of significant financial institutions. Based on vulnerability criteria and judgmental stress tests, twelve indicators of soundness (measuring risk exposure, solvency, liquidity, profitability, and supervisory assessment) are developed. This holistic methodology can be used not only as an early warning/crisis-avoidance system to identify potential systemic problems—and problem institutions—requiring immediate attention, but also to pinpoint needed reforms in the legal, regulatory, and institutional infrastructure that can lessen the likelihood of a future crisis.

Series:

Policy Discussion Paper No. 1999/004

Subject:

Banking Capital adequacy requirements Financial statements Solvency Stress testing

English

Publication Date:

May 1, 1999

ISBN/ISSN:

9781451973433/1564-5193

Stock No:

PPIEA0041999

Pages:

30

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