Spain: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis

International Monetary Fund

No 2024/259, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper focuses on a technical note on systemic risk analysis as part of Financial Sector Assessment Program (FSAP) in Spain. Spain’s economy and its well-developed, bank-dominated financial system have shown resilience through the pandemic, rising global geo-political tensions and tighter financial conditions. The Spanish banking sector has a global imprint, operates a traditional business model, and is strongly profitable. Downside risks are prominent and existing vulnerabilities could amplify the impact of exogenous shocks on financial stability. The Spanish banking and real sectors’ resilience was assessed against a severe but plausible adverse scenario that reflects these risks. The FSAP analysis suggests a moderate rise in the debt-at-risk of the nonfinancial corporates sector in the adverse scenario. Liquidity stress tests show that Significant banking institutions can cope comfortably with market valuation shocks and would face cash flow challenges under large withdrawals of retail deposits. Interconnectedness analysis does not reveal significant vulnerabilities of Spanish banks to of cross-border contagion of foreign banking distress.

Keywords: solvency stress test result; NFC liquidity; D. liquidity-solvency interaction; banking sector asset quality; banking sector asset composition; IMF approach; Stress testing; Loans; Credit; Liquidity requirements; Income; Global; Caribbean (search for similar items in EconPapers)
Pages: 103
Date: 2024-08-01
New Economics Papers: this item is included in nep-fdg and nep-ure
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