Socializing with journalists: Conducting stress tests in the CBBH

Conducting stress tests in the Central Bank of Bosnia and Herzegovina (CBBH) was the topic of this month's meeting with journalists, which was discussed by Vesna Papić, Head of the Financial Stability Department and Belma Mahmutović, Head of the Stress Test Modelling Section.

Stress tests are one of the basic tools for identifying vulnerabilities in the banking sector, and the CBBH started implementing stress tests in 2007. Over time, the framework for conducting stress tests has been continuously improved, and the latest generation of stress tests (a new tool), which is harmonized with the new regulatory framework for banks operations in BH, was developed in 2019 within the FINRA project.

At the meeting with journalists, special attention was paid to the interpretation of the results of stress tests conducted on the basis of data from the end of 2020, and the results of the mentioned stress test were compared with the results of stress tests conducted on the basis of data from the end of the first half of 2021. The results of both stress tests showed that the BH banking sector is resistant to projected shocks, and in case of materialization of projected shocks from both extreme scenarios, the capital adequacy ratio of the banking sector in BH would remain significantly higher than the required regulatory minimum of 12%.

Mentioning the current situation in the banking sector, it was pointed out that despite the unfavourable business circumstances last year, the BH banking sector maintained an adequate level of capitalization, improved asset quality indicators and liquidity indicators were at a satisfactory level.