Solomon Desta, Director of the Bank Supervision Directorate of the National Bank of Ethiopia, emphasized that stress testing is an important tool for assessing the inter-linkages between institutions and sectors, facilitating the identification of potential vulnerabilities and the buildup of risks across sectors.

Stress testing since the global financial crisis has resulted in regional initiatives to implement comprehensive stress testing frameworks that are customized to local and regional circumstances prompted the workshop. International and regional experts facilitated the session built around the Cihak framework developed by the IMF, which is being adopted and implemented, sometimes in a modified form, by the central banks in the region.

Specific areas covered included: 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. 

Participants agreed that there is scope for further capacity building in this area. IMF East AFRITAC stands ready to provide further Technical Assistance (TA) to its member countries on stress-testing. This could include the implementation of the Internal Capital Adequacy Assessment Process (Pillar 2 of the Basel II framework).