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International Monetary Fund
Stress testing (ST) was undertaken as part of the Guernsey Financial sector assessment Program (FSAP) Update in order to assess the resilience of the Guernsey financial system to a variety of potential strains. The approach taken was a simulation of the effect of a potential double-dip recession on solvency of Guernsey banks and insurance companies. The STs assess the sensitivity of banks and insurance companies to single-factor shocks to risk types affecting solvency and liquidity position of institutions. The mission recommends that future STs should be risk-based and that macroprudential analysis should be run on a regular basis.
International Monetary Fund

percent of the sample. Table 2 provides an overview of the structure of the banking sector aggregate balance sheet. 14. To assess the short-term vulnerability of the banking system to a liquidity shock, five large foreign branches were added to the sample . The branches represented 62 percent of Guernsey banking sector assets (and 69 percent of the liquidity risk test sample). Four of them belong to large European banking groups. The structure of the Guernsey financial system is displayed in Table 3 . B. Method 15. Two different approaches to stress tests