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The Resource Georgia : Financial Sector Assessment Program: stress testing the banking sector: technical note

Georgia : Financial Sector Assessment Program: stress testing the banking sector: technical note

Label
Georgia : Financial Sector Assessment Program: stress testing the banking sector: technical note
Title
Georgia
Title remainder
Financial Sector Assessment Program: stress testing the banking sector: technical note
Title variation
Georgia, Financial Sector Assessment Program
Contributor
Subject
Genre
Language
eng
Summary
The Georgian banking sector is sound and stable and has continued to perform well, but faces a number of key risks and vulnerabilities that need to be closely monitored. Particularly challenging among them are credit and funding risks related to dollarization, concentration in the banking sector, and reliance on nonresident deposits. While NPLs are gradually declining from their peak in 2009, credit growth is above its long-term sustainable trend. Dollarization presents specific challenges as it increases credit and liquidity risks. There are two major dollarization-related problems: First, most of the borrowers in U.S. dollars (USD) are unhedged, as their income and expenditures are in national currency (this is especially evident in case of households). Second, the NBG has limited ability to provide liquidity support in USD and other foreign currencies. However, it should be noted that the NBG is implementing a set of macroprudential measures aimed at making FX lending more expensive for banks. For example, current risk weights for FX loans are topped at 175 percent. Separate stress tests (STs) performed by the NBG and by the FSAP mission show that the banking system as a whole is able to withstand severe shocks, given that most banks maintain healthy capital buffers well above regulatory minimum. The tests were conducted in several scenarios ranging from slow growth to severe macroeconomic shocks, and the results show that major banks would generally remain adequately capitalized, taking into account current profits and introduction of Basel II. In adverse scenarios, recapitalization needs are manageable in terms of GDP (1.6 percent for the worst-case scenario). At the same time, uncertainty due to non-linearity of shocks related to lari depreciation warrant continuation of build-up of capital buffers as long as FX denominated loans constitute substantial share of banks' loan portfolios. Credit portfolio concentration risks are limited: default by the largest three borrowers would require additional capital of GEL 50 million for five banks. Market risks are very limited, and trading books do not exist. However, some banks are particularly vulnerable and need to strengthen their capital buffers and to mitigate funding risks. These banks exceed the minimum capital requirement by only a few percentage points (p.p.), which limits their loss-absorption capacity. The high level of profitability and solid net interest margins would go down during crisis periods, driving down net interest and other income. To avoid this pitfall, it is important to introduce Individual Capital Guidance, especially for the weakest banks. When it comes to funding risks, further diversification of funding sources and de-dollarization could help to minimize identified vulnerabilities
Member of
Cataloging source
DJB
http://bibfra.me/vocab/lite/collectionName
IMF eLibrary
Government publication
international or intergovernmental publication
Illustrations
illustrations
Index
no index present
LC call number
HC59.15.I15
LC item number
No. 15/7 ONLINE
Literary form
non fiction
Nature of contents
  • dictionaries
  • bibliography
http://library.link/vocab/relatedWorkOrContributorName
International Monetary Fund
Series statement
IMF country report
Series volume
no. 15/7
http://library.link/vocab/subjectName
  • International Monetary Fund
  • International Monetary Fund
  • Banks and banking
  • Financial risk management
  • Financial risk
  • Dollarization
  • Bank liquidity
  • Bank liquidity
  • Banks and banking
  • Dollarization
  • Financial risk management
  • Georgia (Republic)
Label
Georgia : Financial Sector Assessment Program: stress testing the banking sector: technical note
Instantiates
Publication
Copyright
Note
  • "January 2015."
  • "October 2014"--Page 2 of pdf
  • "Prepared by Monetary and Capital Markets Department"--Page 2 of pdf
Bibliography note
Includes bibliographical references
Carrier category
online resource
Carrier category code
  • cr
Carrier MARC source
rdacarrier
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent
Contents
  • Cover; CONTENTS; GLOSSARY; EXECUTIVE SUMMARY; TABLES; 1. Recommendations; INTRODUCTION AND OVERVIEW; A. Background; FIGURES; 1. Structure of Assets; 2. Structure of Liabilities; 3. Income Structure; 4. Breakdown of Profit and Losses; 2. Financial Soundness Indicators, 2010-13; B. Key Risks to the Banking Sector; 5. Risk Transmission Channels; C. Overview of Stress Tests; 6. Share of Nonresident Deposits; 7. Key Structural Components of FSAP Stress Test Exercise; 3. Introduction of Basel II/III Minimum Capital Adequacy Ratio; D. Scenarios; 8. Historical USD/GEL Rate
  • 4. Scenario-based Solvency Stress TestsBOX; 1. Cross-Checking Shocks to Nonperforming Loans; 9. Forecasted Level of NPL Ratios; 10. Georgia: Shocks in 2007-2009; 11. Developments of Profitability; 12. Deposit Withdrawal in 2008-09; 5. Summary of Assumptions for Liquidity Stress Tests; SOLVENCY STRESS TESTS; A. Bottom-up Stress Test; 6. Scenarios for Bottom-Up Stress Tests; B. FSAP Top-Down Stress Test; 13. Market Risk Exposures to Capital; 14. Tier I CAR under Basel II Alternative Stress Testing: STD Approach; C. NBG Top-Down Stress Tests; 15. Tier 1 CAR; 16. Recapitalization Needs
  • 17. Tier 1 CAR18. Recapitalization Needs; 19. Countercyclical Buffer; D. Reconciliation of Results; 20. Capital Adequacy Ratio under Severe Scenario; 21. Capital Shortage for Severe Scenario; E. Recommendations; 22. ST Results: CAR under Baseline Scenario; 23. ST Results: CAR under Mild Recession Scenarios; 24. ST Results: CAR under Adverse Recession Scenarios; INDIVIDUAL LIQUIDITY AND NETWORK STRESS TESTS; A. Models; B. Results; 7. Liquidity Stress Test Results; C. Interbank Contagion (Systemic) Risk; 25. Liquidity Coverage Ratio (LCR): Before and After Stress; D. Recommendations
  • 26. Interbank Market NetworkAPPENDIXES; I. Statistical Annex; II. Stress Test Matrix: Solvency and Liquidity Risks and Network Effects; III. Top-Down Satellite Model for Credit Risk: IMF Approach; IV. Top-Down Satellite Model for Credit Risk: NBG Approach; V. Risk Assessment Matrix; REFERENCES
Control code
900167771
Extent
1 online resource (62 pages)
Form of item
online
Isbn
9781498306591
Issn
1934-7685
Media category
computer
Media MARC source
rdamedia
Media type code
  • c
Other control number
10.5089/9781498306591.002
Other physical details
color illustrations
Specific material designation
remote
System control number
(OCoLC)900167771
Label
Georgia : Financial Sector Assessment Program: stress testing the banking sector: technical note
Publication
Copyright
Note
  • "January 2015."
  • "October 2014"--Page 2 of pdf
  • "Prepared by Monetary and Capital Markets Department"--Page 2 of pdf
Bibliography note
Includes bibliographical references
Carrier category
online resource
Carrier category code
  • cr
Carrier MARC source
rdacarrier
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent
Contents
  • Cover; CONTENTS; GLOSSARY; EXECUTIVE SUMMARY; TABLES; 1. Recommendations; INTRODUCTION AND OVERVIEW; A. Background; FIGURES; 1. Structure of Assets; 2. Structure of Liabilities; 3. Income Structure; 4. Breakdown of Profit and Losses; 2. Financial Soundness Indicators, 2010-13; B. Key Risks to the Banking Sector; 5. Risk Transmission Channels; C. Overview of Stress Tests; 6. Share of Nonresident Deposits; 7. Key Structural Components of FSAP Stress Test Exercise; 3. Introduction of Basel II/III Minimum Capital Adequacy Ratio; D. Scenarios; 8. Historical USD/GEL Rate
  • 4. Scenario-based Solvency Stress TestsBOX; 1. Cross-Checking Shocks to Nonperforming Loans; 9. Forecasted Level of NPL Ratios; 10. Georgia: Shocks in 2007-2009; 11. Developments of Profitability; 12. Deposit Withdrawal in 2008-09; 5. Summary of Assumptions for Liquidity Stress Tests; SOLVENCY STRESS TESTS; A. Bottom-up Stress Test; 6. Scenarios for Bottom-Up Stress Tests; B. FSAP Top-Down Stress Test; 13. Market Risk Exposures to Capital; 14. Tier I CAR under Basel II Alternative Stress Testing: STD Approach; C. NBG Top-Down Stress Tests; 15. Tier 1 CAR; 16. Recapitalization Needs
  • 17. Tier 1 CAR18. Recapitalization Needs; 19. Countercyclical Buffer; D. Reconciliation of Results; 20. Capital Adequacy Ratio under Severe Scenario; 21. Capital Shortage for Severe Scenario; E. Recommendations; 22. ST Results: CAR under Baseline Scenario; 23. ST Results: CAR under Mild Recession Scenarios; 24. ST Results: CAR under Adverse Recession Scenarios; INDIVIDUAL LIQUIDITY AND NETWORK STRESS TESTS; A. Models; B. Results; 7. Liquidity Stress Test Results; C. Interbank Contagion (Systemic) Risk; 25. Liquidity Coverage Ratio (LCR): Before and After Stress; D. Recommendations
  • 26. Interbank Market NetworkAPPENDIXES; I. Statistical Annex; II. Stress Test Matrix: Solvency and Liquidity Risks and Network Effects; III. Top-Down Satellite Model for Credit Risk: IMF Approach; IV. Top-Down Satellite Model for Credit Risk: NBG Approach; V. Risk Assessment Matrix; REFERENCES
Control code
900167771
Extent
1 online resource (62 pages)
Form of item
online
Isbn
9781498306591
Issn
1934-7685
Media category
computer
Media MARC source
rdamedia
Media type code
  • c
Other control number
10.5089/9781498306591.002
Other physical details
color illustrations
Specific material designation
remote
System control number
(OCoLC)900167771

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