Financial Stability Risk Assessment
The BOT monitors and assesses risks according to the following framework.
including households, businesses, real estate, commercial banks, non-banks, saving cooperatives, financial market, external sector and new risks such as digital asset market.
When a problem arises in one part of the financial system, it may spread rapidly to other connected sectors, resulting in risk transmission to financial and real sectors. Examples of previous crises are the 1997 Asian financial crisis and the 2008 global financial crisis, which were originated from the financial sector and spread to the real economy.
to be readily prepared for policy implementation in addressing risk and impact from worst case scenario.
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.
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.
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.
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.
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.