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Azerbaijan-based bank will have to pass stress tests

11 November 2010 11:35 (UTC +04:00)

According to CBA, the rules cover the types of stress tests, conducting methodology, organization of stress test and issues on accounting.

According to rules, the banks must pass the stress tests for providing of operational decision-making. Stress tests are one of the elements of management mechanisms of risks. Within the frame work on stress tests, the banks have to take each risk factor hampering the management of risks into account. These factors collect the components of market, credit, liquidity and other risks.â€

Several different factors have to be taken into account. Some of them are: Influence of shock events on bankâ€™s loan portfolio and quality of it, influence of changes in GDP on banksâ€™ loan portfolio and deposit portfolio, influence of inflation changes on the interests of bankâ€™s production and loan portfolio, influence of changes of different production on banksâ€™ interest rates, profit, capital, loan and deposit portfolios, assets and liabilities in foreign currency, influence of changes in structure of inactive loans on bankâ€™s profit, capital and liquidity, influence of problems with large credits on bankâ€™s loan portfolio, liquidity and profit, influence of paying off the foreign debt earlier on bankâ€™s liquidity, influence of recalling of large deposits on bankâ€™s liquidity, influence of decrease of highly liquid assets in banks on new loans and etc..