Course on Systemic Macro-Financial Risk Analysis

The primary purpose of macrofinancial risk analysis, including quantitative tools of risk assessment, such as stress tests, is to assess ability of financial institutions to withstand severe economic and financial shocks, ensure they have sufficient capital and liquidity to absorb potential losses and continue lending. This analysis helps supervisors to identify vulnerabilities, design micro and macroprudential tools to safeguard financial stability, and ultimately protect depositors. 

A two-week course in June, led by the IMF’s Monetary and Capital Markets Department, focused on the best practices in systemic risk identification and analysis, financial stability reporting and stress testing. Participants learned about compiling systemic risk dashboards, conducting stress testing, using stress test results for macroprudential policy, developing methodologies to measure credit risk, addressing challenges created by IFRS9, quantifying interest rate in the banking book (IRRBB), and performing liquidity stress testing. The course also had dedicated sessions on feedback loops between banks’ solvency and liquidity risks which included an in-depth analysis of recent episodes of risk management in US banks. Several sessions were dedicated to NBFI risk analysis and corporate and household stress testing. IMF guest speakers presented practical cases and approaches to model household financial vulnerabilities, and risks in crypto assets. The World Bank speaker discussed financial stability implications related to banks’ resolution frameworks. ECB guest speakers presented a macroprudential stress testing model developed to set the countercyclical capital buffer (CCyB) rate and methods to measure vulnerabilities in the real estate sector. 

Participants who came from national authorities across Europe and Central Asia participated in group workshops, discussed micro and macroprudential policy considerations for their respective jurisdictions. Practical exercises focused on solvency and liquidity risks as well as on feedback loops between solvency risk and credit growth.

Alongside regional training, the IMF’s Monetary and Capital Markets Department also provides bilateral capacity development on topics, such as, solvency and liquidity risk analysis and stress testing, macroprudential policy. 

Mindaugas Leika, Senior Financial Sector Expert, IMF