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26 April 2011

IMF published working paper on balance sheet stress testing


The IMF published a working paper offering a “second generation” solvency stress testing framework that seeks to enrich stress tests in terms of risk-sensitivity, while keeping them "flexible, transparent and user-friendly".

The main contributions include:

(i) increasing the risk-sensitivity of stress testing by capturing changes in risk-weighted assets (RWAs) under stress, including for non-internal ratings-based (IRB) banks (through a quasi-IRB approach);
(ii) providing stress testers with a comprehensive platform to use satellite models, and to define various assumptions and scenarios; and
(iii) allowing stress testers to run multi-year scenarios (up to five years) for hundreds of banks, depending on the availability of data.

Full working paper
 



© International Monetary Fund

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