Stress Testing Financial Systems: What to Do When the Governor Calls

Paul Hilbers, Matthew Jones and Graham Slack

No 2004/127, IMF Working Papers from International Monetary Fund

Abstract: Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This paper is intended to answer some of the basic questions that may arise as part of the process of stress testing. The paper begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The paper provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.

Keywords: WP; process; financial institution; bank; foreign currency; iterative process; price level; return on equity; Stress testing; financial soundness indicators; financial system context; financial system structure; bank balance; C. balance-sheet implementation; estimation procedure; income statements; system stress tests; insurance company balance sheets; system level; risk management system; Financial statements; Financial Sector Assessment Program; Personal income; Global (search for similar items in EconPapers)
Pages: 38
Date: 2004-07-01
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Citations: View citations in EconPapers (39)

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