Sweden: Financial Sector Assessment Program-Technical Note-Stress Testing

International Monetary Fund

No 2017/309, IMF Staff Country Reports from International Monetary Fund

Abstract: This Technical Note explains the stress testing approach of the 2016 Financial Sector Assessment Program in assessment of risk in the Swedish financial sector and provides the results of the tests. Stress tests covered three major segments of the domestic financial sector. The resilience of the Swedish banking system was tested against solvency, liquidity, and contagion risks. The solvency stress test suggests that banks would be resilient to severe economic distress. Bank liquidity stress tests suggest that banks could withstand severe funding and market liquidity shocks, but there are pockets of vulnerability. The overall stress testing exercise suggests that there is room for improvement in the individual components of authorities’ stress testing framework.

Keywords: ISCR; CR; investment funds; net income; balance sheet; current yield; long-dated investment assets; sovereign bond; cash flow; stress scenario; asset class; interest income; Swedish krona; forward rate; market value; Stress testing; Credit; Personal income; Solvency stress testing; Mutual funds; Baltics; Global (search for similar items in EconPapers)
Pages: 93
Date: 2017-10-05
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