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Stress-testing banks during the Covid-19 pandemic

Summary:
FSI Briefs  |  No 11  |  12 October 2020 by  Patrizia Baudino PDF full text (531kb)  |  9 pages Highlights In response to the Covid-19 pandemic, a number of authorities that regularly conduct stress tests on individual banks adjusted their approach. They performed ad hoc exercises to assess the vulnerability of banking sectors as a whole. These exercises are different from regular ones in terms of key features such as objectives, design and methodologies, and communication. In the short term, such stress tests can support the assessment of the pandemic's

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FSI Briefs  |  No 11  | 
12 October 2020
PDF full text
 (531kb)
 |  9 pages

Highlights

  • In response to the Covid-19 pandemic, a number of authorities that regularly conduct stress tests on individual banks adjusted their approach. They performed ad hoc exercises to assess the vulnerability of banking sectors as a whole. These exercises are different from regular ones in terms of key features such as objectives, design and methodologies, and communication.
  • In the short term, such stress tests can support the assessment of the pandemic's impact at an aggregate level.
  • As the pandemic evolves and its impact is better understood, authorities can further adjust their stress tests and refine their key features accordingly. That will allow for a more granular, bank-level assessment. It may also help authorities to achieve the necessary balance between keeping banks safe and sound, and ensuring an adequate flow of credit to the real economy.
International Settlement
The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

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