IMF Staff Country Reports

Spain: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis

August 1, 2024

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International Monetary Fund. Monetary and Capital Markets Department "Spain: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis", IMF Staff Country Reports 2024, 259 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400284342.002

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Summary

This paper focuses on a technical note on systemic risk analysis as part of Financial Sector Assessment Program (FSAP) in Spain. Spain’s economy and its well-developed, bank-dominated financial system have shown resilience through the pandemic, rising global geo-political tensions and tighter financial conditions. The Spanish banking sector has a global imprint, operates a traditional business model, and is strongly profitable. Downside risks are prominent and existing vulnerabilities could amplify the impact of exogenous shocks on financial stability. The Spanish banking and real sectors’ resilience was assessed against a severe but plausible adverse scenario that reflects these risks. The FSAP analysis suggests a moderate rise in the debt-at-risk of the nonfinancial corporates sector in the adverse scenario. Liquidity stress tests show that Significant banking institutions can cope comfortably with market valuation shocks and would face cash flow challenges under large withdrawals of retail deposits. Interconnectedness analysis does not reveal significant vulnerabilities of Spanish banks to of cross-border contagion of foreign banking distress.

Subject: Credit, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Income, Liquidity requirements, Loans, Money, National accounts, Stress testing

Keywords: Banking sector asset composition, Banking sector asset quality, Caribbean, Credit, D. liquidity-solvency interaction, Global, IMF approach, Income, Liquidity requirements, Loans, NFC liquidity, Solvency stress test result, Stress testing

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