Stress Testing
—SBP issued “Stress Testing
Guidelines” in 2005 which were subsequently revised in 2012
—Cognizant of the critical
role that stress tests can play in identifying the vulnerabilities of banks/ DFIs at the early
stage SBP has adopted two-pronged Strategy.
—SBP carries out in-house stress testing of all banks on quarterly
basis using sensitivity analysis & ii) Scenario analysis
—Institutionalizing Stress
Testing Framework at Banks. Banks are required to carry out a set of 18
mandatory sensitivity tests on quarterly basis. Moreover, big banks, having
share of more than 4% of the assets of the banking system are also required to
design advanced stress tests which include Scenario analysis, stress tests for
operational risk and Liquidity risk and Islamic banking operations.