Canada: Financial Sector Assessment Program-Stress Testing-Technical Note

Canada: Financial Sector Assessment Program-Stress Testing-Technical Note

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This paper examines the stress testing module of the 2013 Financial Sector Assessment Program (FSAP) update for Canada. The IMF report highlights the three major segments of the domestic financial covered during the stress tests. The bank solvency stress tests suggest that while all banks would fall below the Canadian a€œall-ina€ Common Equity Tier 1 (CET1) supervisory threshold during severe economic distress, the resulting recapitalization needs are manageable. This IMF report provides recommendations for the Canadian authorities, derived from this joint exercise, to enhance the individual components of their stress testing framework.... Residential mortgages (uninsured) 8% HELOCs (uninsured) 8% Consumer credit card loans 12% 9% Business loans 59% ... small to affect capital positions significantly.36 The modest negative impact of dividend distribution is felt in the first year only, ... the economic downturn (2013-2015) relative to the base year CET1 ratio or 740 basis points in comparison to 2015 CET1 in the baseline scenario.

Title:Canada: Financial Sector Assessment Program-Stress Testing-Technical Note
Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher:International Monetary Fund - 2014-03-07

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