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Home > Research and Studies > Bank of Japan Working Paper Series, Review Series, and Research Laboratory Series > Bank of Japan Review Series 2020 > (BOJ Review) Supervisory Simultaneous Stress Testing Based on Common Scenarios
December 17, 2020
Financial System and Bank Examination Department of the Bank of Japan
Strategy Development and Management Bureau, and Supervision Bureau of the Financial Services Agency
In light of the experience of the 2008 global financial crisis, the use of stress testing has become widespread among financial authorities in major jurisdictions as a central tool in assessing the resilience of systemically important financial institutions. In Japan, too, given that major banks' risk profiles have become more diversified and complex in recent years as they have expanded their overseas activities and non-commercial banking businesses within their groups, it is becoming ever more important to use stress testing for assessing banks' resilience and ensuring that risk management capabilities are put in place. This paper outlines the supervisory simultaneous stress testing based on common scenarios, an exercise newly started by the Bank of Japan and the Financial Services Agency, describing its background, differences in the institutional arrangements from the United States and Europe, and the role of benchmarking and horizontal reviews.
Bank of Japan Review is published by the Bank of Japan to explain recent economic and financial topics for a wide range of readers. This report, 2020-E-9, is a translation of the original Japanese version, 2020-J-13, published in October 2020.
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