United Kingdom: Financial Sector Assessment Program-Stress Testing the Banking Sector-Technical Note

International Monetary Fund

No 2016/163, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper discusses how Financial Sector Assessment Program (FSAP) stress test assesses the resilience of the banking sector as a whole rather than the capital adequacy of individual institutions. The FSAP approach to stress testing is essentially macroprudential: it focuses on resilience of the broader financial system to adverse macro-financial conditions rather than on resilience of individual banks to specific shocks. This test ensures consistency in macroeconomic scenarios and metrics across firms to facilitate the assessment of the banking system as a whole. The stress test analysis is intended to help country authorities to identify key sources of systemic risk in the banking sector and inform macroprudential policies to enhance its resilience to absorb shocks.

Keywords: ISCR; CR; interest rate; money market; banking system; cash flow; hurdle rate; mortgage portfolio; yield curve; U.K. bank; U.K.-headquartered bank; single currency; BoE scenario; U.K. leverage framework; stress test; fixed income; Stress testing; Financial Sector Assessment Program; Credit risk; Solvency stress testing; Global (search for similar items in EconPapers)
Pages: 91
Date: 2016-06-17
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