MEFMI Regional Workshop on Prudential Micro Stress Testing in Kigali, Rwanda

MEFMI is conducting a Regional Workshop on Micro Prudential Stress Testing in Kigali, Rwanda from 18 to 22 July 2016. The regional workshop, which is being held at the Galaxy Hotel has attracted 30 participants from nine (9) Central Banks namely Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Uganda, Rwanda and Zimbabwe.

The workshop was motivated by the growing attention on stress testing since the Global Financial Crisis and the resulting regional initiatives to implement comprehensive stress testing frameworks that are customized to the local and regional circumstances.
The Basel Committee on Banking Supervision (BCBS) in its Core Principles for Effective Banking Supervision requires banks to undertake stress testing as part of the criteria in Principle 15 (Risk Management Process), Principle 22 (Market Risk), Principle 23 (Interest Rate Risk in the Banking Book) and Principle 24 (Liquidity Risk). The BCBS also provides guidance to supervisors in relation to regularly assess a bank’s stress testing programme, and corrective action if material deficiencies are identified and assessed.

Further, regulators are also expected to regularly conduct stress tests on institutions on an individual basis and on a sector basis to determine the vulnerability of the financial sector. They are also expected to request banking institutions to conduct their own stress tests as part of the corporate governance culture.  At regional level, a number of countries are still in the process of implementing stress testing frameworks in their supervisory processes in compliance to the BCBS.

Against this background, the content of the workshop is built around the Cihak stress testing framework, which is being adopted and implemented, sometimes in a modified form, by the Central Banks in the region. In particular, stress testing and sensitivity analysis for credit risk, interest rate risk, foreign exchange risk, liquidity risk and testing for possible spillover effects through interbank contagion will be discussed.  The workshop is also expected to discuss how these risks can be combined in stress testing scenarios. The concepts and approaches discussed will be tailored to the regional context and will take into account data availability constraints.

The workshop will also cover stress testing as a forward looking process that supplements the risk management process, contingency planning process and capital planning approaches in banks. 
The workshop was officially opened by the Deputy Governor of Nacional Bank of Rwanda Dr. Monique Nsanzabaganwa. In her opening remarks, the Dr. Nsanzabaganwaa noted the need for departments in the central banks to collaborate and coordinate financial stability assessments in order to strengthen and improve stress testing tools and not limit the development of stress testing modules to just bank supervision departments. This position will ensure that tools developed are comprehensive.

Mr Patrick Mutimba the Director of Financial Sector Management at MEFMI is leading the team from MEFMI. Facilitators are MEFMI Accredited Fellows from Reserve Bank of Zimbabwe, Mr Ruzayi Chiviri and Mr Bob Takavingofa and a MEFMI Graduate Fellow from Banco de Mocambique, Mr Dercio Mutimucuio.

Dr. Nsanzabaganwa commended MEFMI for utilizing regional talent in its capacity building programmes. She noted that this sends a strong message that the primary responsibility to upskill and upgrade systems lies with us, although external experts are often required to supplement these regional efforts.

MEFMI is conducting a Regional Workshop on Micro Prudential Stress Testing in Kigali, Rwanda from 18 to 22 July 2016. The regional workshop, which is being held at the Galaxy Hotel has attracted 30 participants from nine (9) Central Banks namely Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Uganda, Rwanda and Zimbabwe.

The workshop was motivated by the growing attention on stress testing since the Global Financial Crisis and the resulting regional initiatives to implement comprehensive stress testing frameworks that are customized to the local and regional circumstances.