21
8. The results suggest resilience of the banks covered by the exercise to the adverse
scenario (Figure 9). NPL ratios would increase substantially, and most banks would experience
significant losses in net income and a decline in capital ratios. Three banks would experience a
modest erosion of their capital conservation buffer, which would be easily restored with one-quarter
of “normal” profits. The exploratory solvency stress tests on SFIs indicate an important vulnerability
under the adverse scenario for certain SFIs due to limited asset diversification, but the impact could
be largely absorbed by high provisioning. Collecting more granular data on SFIs is key to refine the
exercise.
Figure 9. Thailand: Solvency Stress Test Results
Under the adverse scenario the banks’ NPL ratios
increase substantially…
…capital ratios decline…
…although with significant dispersion...
…loan loss provisions are the main factor behind the
decline in capital ratios.
Sources: The BoT and IMF staff estimates.
Note: Hurdle rates for total capital are 8.5 percent for minimum requirement, 9.5 percent including D-SIB surcharge, 11 percent
including capital conservation buffer (CCB), and 12 percent including D-Sib surcharge and CCB.
9. Sensitivity tests broadly confirm the overall resilience of the banking system (Figures
10 and 11). The sensitivity tests for interest rate risk in the banking book (IRRBB) are meant to
complement the moderate policy rate assumption in the macro scenario. The results indicate a
relatively limited exposure of the banks; no bank would breach the 15 percent Tier 1 capital
threshold for the impact on the Economic Value of Equity (EVE), and all remain within the existing
capital buffers following the impact on Net Interest Income (NII). The risk of credit concentration is
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
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