To assess the resilience of the system to adverse macroeconomic scenarios, stress testing analysis is carried out within a macro stress testing framework. Two major groups of macro testing exercises are conducted: one based on a multivariate regression, and the other based on a vector autoregressive (VAR) model.
While the former allows evaluating the impact of a particular macroeconomic variable on the banking system’s NPA and capital ratios, the latter reflects the impact of the overall economic stress situation on the NPA ratio and bank capital through a feed-back effect. The macro stress tests are also conducted on a quarterly basis. 49.