Financial Stability Risk Assessment
Financial stability risk assessment framework
The BOT monitors and assesses risks according to the following framework.
BOT’s risk monitoring tools for financial system
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Financial Stability Dashboard
a set of risk indicators of each entity in the financial system. As one of the crucial tools, financial stability dashboard is used for risk assessment in the financial system in a forward-looking manner. The BOT separately assesses the risk in each sector by using indicators to indicate the risk build-ups throughout the economic cycle whether it is a upturn or downturn period. Various risk thresholds are assigned to early warn the BOT to promptly implement relevant measures.
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Network Analysis
the analysis of interconnectedness in the financial system. It is a tool for assessing the channels and severity of the contagion impact of problems from one part to other parts in the financial system. This would enable the BOT to mitigate the risk and ensure that the risk would be well managed and contained.
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Sensitivity Analysis
a tool for examining the impact of various types of risk on household and business sectors to assess plausible impact in the future. This would allow the BOT to be prepared for measure implementation to ensure that household and business sectors can withstand the impact of uncertainties.
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Stress Testing
a tool for testing the resilency of financial institution system under plausible risk factors originated from both internal and external environment. This would allow the BOT to be prepared for measure implementation to ensure that financial institutions would have adequate buffer to withstand the crisis and would continue to act as financial intermediaries.
There are 2 types of stress testing in Thailand - 1) Macro stress testing, in which is conducted by the BOT and 2) Supervisory stress testing, in which is conducted by financial institutions. Both types are conducted under the same risk scenarios for the benefit of comparison.
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Soft Information
a tool for assessing risk based on information obtained from business owners or affected entities. The BOT also uses this tool in conjunction with techinical tools. Indeed, the BOT opens for comments from agencies in the private sector and those directly affected through various channels. For example, the BOT holds in-person meeting with organizations (private companies, financial institutions, associations) and public hearing, and conducts household survey. All comments and perspectives would be gathered for a comprehensive analysis to ensure the practicality of measure and deliver maximum benefits for financial stability and all sectors in the financial system.
