All 38 domestic lenders passed their stress tests to ensure that they possess healthy risk-taking capabilities under unfavorable operating scenarios, the Financial Supervisory Commission said on Thursday.
The adverse scenarios include an economic slowdown at home and abroad, rising unemployment coupled with house price corrections, and bad loan increases, the commission said.
The stress test came after the US Federal Reserve last year introduced a series of drastic interest rate hikes to tame inflation and threw financial markets worldwide into disarray, it said.
Photo: Kelson Wang, Taipei Times
The latest test also factored in the 18 ASEAN markets where local lenders have expanded their presence to better serve Taiwanese firms and support the government’s call to reduce dependence on China.
The test showed that potential increases in credit losses would put some pressure on the profitability of Taiwanese lenders, but the losses would be bearable, the commission said.
All 38 banks performed better than required in terms of equities, tier-1 capital, risk-based capital and leverage readings under moderate and serious stress scenarios, it said.
The commission said it also asked lenders to make sure they have sufficient financial resources in case they need to shore up their capital strength after being punished by financial authorities for lax internal oversight or other malpractices.
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