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

International Monetary Fund

No 2024/063, IMF Staff Country Reports from International Monetary Fund

Abstract: This technical note discusses assessment of systemic risks and vulnerabilities for banks in Botswana. The systemic risk analysis was conducted in the aftermath of the coronavirus disease 2019 pandemic. The assessment is based on stress tests, which simulate the health of the banks under a severe yet plausible adverse scenario. The scenario includes global and domestic inflationary pressures, monetary policy tightness, and a major slowdown of economic activity. The exercises covered eight commercial banks as of June 2022. Three types of stress test exercises were performed: a top-down solvency stress test, a liquidity stress test, and a contagion and interconnectedness stress test. The latter focused on the domestic banking interconnectedness. The financial system appears resilient to a wide range of shocks. Solvency stress tests identify small capital shortfalls in two banks under the adverse scenario. The Financial Sector Assessment Program recommends that the Bank of Botswana introduces macro and micro level stress test based on a multiperiod scenario analysis and develops its framework to assess interest rate risk in the banking book.

Keywords: solvency stress test result; banking system asset decomposition; LCR sensitivity analysis; bank solvency stress test; I. NPL ratios satellite model; Liquidity requirements; Commercial banks; Stress testing; Loans; Nonperforming loans; Global (search for similar items in EconPapers)
Pages: 63
Date: 2024-03-05
New Economics Papers: this item is included in nep-fdg
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=545519 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfscr:2024/063

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Staff Country Reports from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().