Wednesday, February 19, 2020

On the 2020 liquidity stress testing exercise by Indonesian banks

A bottom-up stress testing (BUST) exercise is currently ongoing and Indonesian DSIBs are to submit the results using templates that I have helped design.

In contrast to the capital stress testing template, the liquidity ST template underwent significant changes compared to last year's version. In this event, we will discuss in detail its data requirements and design backgrounds in order for the participating banks to achieve accurate and timely submission by end of March 2020. 

The session will also address the linkage of the liquidity ST with the capital stress test exercise to strengthen banks’ liquidity risk measurement, including recovery planning.

In particular, I would like to raise understanding of the background of liquidity stress test requirements; provide rationales behind the design of the new ST liquidity template; explain special features in the cashflow mismatch analysis template and interpretation of the liquidity ST results with fictitious figures, under supervisory and own scenarios. 

A well-executed liquidity ST exercise will raise the confidence of banks and regulators to adopt a more comprehensive Pillar 2 liquidity framework.

#ILAAP #LiquidityStressTesting #Pillar2 #SupervisoryST

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