Overview
This series explains why the IMF's systemwide stress-testing approach looks beyond institution-level losses: banks, NBFIs, clients, markets, and cross-border links can amplify shocks through funding pressure, collateral calls, redemptions, forced sales, and price feedback. It distinguishes flow-of-funds mapping from investment-fund liquidity analysis and shows how FSAP applications can compare scenarios and inform priorities, while public descriptions do not establish universal forecasts.
Learning outcomes
- A bank-only test can capture direct losses yet miss amplification through connected institutions, clients, markets, and borders.
- Liquidity becomes systemic when simultaneous withdrawals, redemptions, collateral calls, or sales alter prices and funding conditions.
- The IMF's flow-of-funds framework maps exposure paths; investment-fund liquidity analysis examines fire-sale and market-impact feedback.
- In FSAPs, these tools support conditional scenario comparisons and policy priorities, not universal forecasts or precise rankings.
Keywords
Preview every chapter · Unlock full text, audio, and video from chapter 4
PlansFAQ
Why does the IMF's systemwide stress-testing approach include NBFIs?
It includes NBFIs because their funding, collateral, clients, and market links can transmit or amplify shocks affecting banks and other actors.
How does liquidity stress spread from one balance sheet to many?
It spreads when simultaneous withdrawals, redemptions, collateral calls, or forced sales change prices, market liquidity, or funding conditions for connected actors.
What do the IMF's two stress-testing tools each reveal?
The flow-of-funds framework maps claims and funding relationships, while investment-fund liquidity analysis examines redemptions, sales, fire sales, and market impact.
How should FSAPs use systemwide stress-test results?
FSAPs should treat them as conditional scenario evidence, comparing transmission paths and sensitivities to identify data and policy priorities rather than universal forecasts.