Prudencial Requirements for Financial Systems and Subsequent Results of their Stress Testing
Author: Kairat Bolatovich Koishibekov (Burgas Free University)
Keywords: Bank Stress Tests, Prudential requirements, Asset quality, Tier 1 Capital Ratio, Core Capital, Risk Weighted Assets.
The paper tackles the problems related to the study of the Bulgarian banking experience for conducting stress tests of the banking system. The prudential requirements of banking supervision are analysed, the results of recent stress tests by Bulgarian banks are assessed. The quality review of assets which reflect the credit risk level of a particular bank asset is emphasised. Non-performing assets that do not carry the expected cash flow of banks are characterised. Important indicators such as "common equity tier 1, CET1" are analyzed and tracked. In the end, the results of the latest stress test of the banking system covering six commercial and investment banks in the country are put to analysis and evaluation. Some key findings from the analysis are outlined.