FSI Briefs | No 11 | 12 October 2020
by Patrizia Baudino
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.
The full paper is available at https://www.bis.org/fsi/fsibriefs11.pdf