Stress Testing for the Bolivian Banking System
DOI:
https://doi.org/10.35319/lajed.201319107Keywords:
Stress Tests, Financial Instability, MacroprudentialAbstract
In terms of regulation, Basel III urges supervisors to move towards a system of banking supervision more risk-oriented, especially generating measures or models that can anticipate or show vulnerabilities of financial institutions. In this attempt, throughout the last decade there was an important development of macro stress testing models, brought about primarily by the International Monetary Fund and subsequently by various central banks. This paper, based on an analysis of scenarios for Bolivia and a set of stress methodologies developed by Cihak (2001, 2004, 2005, 2007) and Blaschke, Jones, Majnoni y Martínez Peria (2001), proposes an analysis of the principal risks, linked to changes in interest rates and exchange rates, to be managed by Bolivian financial institutions for 2011 set in four key areas: credit risk, interest rate risk, foreign exchange risk and liquidity risk. The results demonstrate that the banking system is more vulnerable to changes in interest rates due to maturity gap of existing disincentives generated by the banks (low borrowing rates for fixed deposits). In addition, the interest rate risk generates the largest impact on the CAR in the scenarios presented, followed by the exchange rate risk and credit risk. Finally, the favorable results of the liquidity stress tests are explained by high levels of liquidity that the bolivian banking system receantly counts
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