Taiwan’s central bank deputy government has told supervisory regulators from Asia and the Pacific that future “stress tests”on banks need to better reflect “reality”, reports Focus Taiwan.
Central bank Deputy Governor Yang Chin-lung said the stress tests performed by banks before the global crisis failed because they underestimated the possibility of certain real-world situations.
He says now is the perfect time to learn lessons and impose tests that are more realistic.
Stress tests simulate different adverse scenarios, such as market crashes, higher interest rates, or big increases in commodity prices, to determine whether a financial institution has adequate resources to respond effectively to the crisis.
Bangladesh, Cambodia, Indonesia, Fiji, Malaysia, Mongolia, Sri Lanka, Hong Kong and Taiwan are represented at the conference, which is jointly planned by a training center affiliated to the Conference of Governors of South East Asian Central Banks (SEACEN) and Germany’s central bank Deutsche Bundesbank.