FSAP Stress Testing : Singapore's Experience.
Abstract
Singapore participated in the IMF-World Bank Financial Sector Assessment Program (FSAP) in 2002-2004. As part of the FSAP, the MAS coordinated an industry-level stress test involving systemically important banks and insurance companies. The purpose of this paper is to share the many processes needed to execute a broad-based stress test involving institutions with dissimilar risk management practices, with a focus on credit risk stress test for the banking industry. Banks typically use a bottom-up, loan-by-loan approach for stress testing their corporate loans, where model estimates are supplemented by judgment and experiences of bank credit officers. A top-down, portfolio approach is preferred for stress testing consumer loans, given that these loans are usually large in number but small in quantum. On the whole, the FSAP stress test process required intensive coordination and substantial input of resources by both the participating institutions and the MAS. Experience gained from the exercise would be incorporated to improve the MAS' regular stress testing of the financial sector.
Related Publications
-
Staff PapersPublished Date: 11 February 2020
Cyber Risk Surveillance: A Case Study of Singapore
MAS Staff Paper No. 57, February 2020 - By Joseph Goh, Heedon Kang, Zhi Xing Koh, Jin Way Lim, Cheng Wei Ng, Galen Sher, and Chris Yao
-
Staff PapersPublished Date: 07 November 2019
Effects of Dark Trading on Liquidity of Singapore Equity Market
MAS Staff Paper No. 56, November 2019 - By Chioh Wenn Sheng, Chua Bing Kiat, Andrew Ang, Fan Jia Rong and Brandon Sim
-
Staff PapersPublished Date: 31 January 2017
Empirical Evidence on “Systemic as a Herd”: The Case of Japanese Regional Banks
MAS Staff Paper No. 55, January 2017 - By Naohisa Hirakata, Yosuke Kido, and Jie Liang Thum