Luxembourg: Financial Sector Assessment Program: Technical Note-Risk Analysis

International Monetary Fund

No 2017/261, IMF Staff Country Reports from International Monetary Fund

Abstract: This Technical Note reviews the stability of Luxembourg’s financial system. The financial soundness indicators for Luxembourg’s financial system, which plays a key role in the intermediation of financial capital, have remained relatively robust in recent years. Household stress test results suggest that households’ solvency would be significantly affected by a drop in income and housing prices and a rise in unemployment. Bank liquidity displays broad resilience, but would be weakened should wholesale funding dry up or funding stress emerge in foreign currencies. Banks were found to be less vulnerable to direct contagion risk through bilateral exposure; however, most banks have considerable cross-border exposure.

Keywords: ISCR; CR; bank; liquidity; credit risk; interest rate; liquidity stress tests; hurdle rate; foreign exchange; investment fund industry; short-term debt; stress test result; investment fund liquidity risk; sector stress tests; liquidity stress test result; quantitative analysis; liquidity shortfall; Stress testing; Mutual funds; Liquidity stress testing; Commercial banks; Liquidity requirements; Global; Europe (search for similar items in EconPapers)
Pages: 114
Date: 2017-08-28
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Citations: View citations in EconPapers (1)

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