Assessing the solvency of banks using stress test ABC case study

Abstract

The study aims to provide a model for assessing the solvency of banks using the stress test, as this test was conducted on the financial statements 2018 of the Arab Banking Corporation - Algeria, using shocks related to each of the credit, sectoral concentration, interest rate, liquidity risks, and use both sensitivity and scenario analysis and measure the effect of shocks on the solvency rate using Excel. The results indicate that the solvency rate decreased in all assumed shocks, but the effect varies according to the type of risk. as it decreased when the percentage of non-performing loans increased, especially when the worst scenario occurred, and also decreased due to shocks in the sectors that obtained credit from the bank, especially the private institutions sector. As for the interest rate risk shocks, the changes in the latter did not have a significant impact on the solvency rate. As for liquidity risk shocks, the results show the bank's ability to face these shocks. The results of the scenario shocks showed the significant impact of both the solvency rate and the bank’s profits as a result of these shocks.