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Executive Summary (Summary points only) "1. A range of stress tests was used to quantify the potential impacts of risks and vulnerabilities in bank and nonbank sectors. 2. The stress tests run by the authorities and by companies under the DFA suggest that most large BHCs are resilient to shocks similar to the last crisis. 3. The [IMF’s] staff’s analysis benefitted from the relatively wide range of publicly available data, but was nonetheless subject to data constraints. 4. The solvency stress test considered two scenarios - baseline and stress - and a range of sensitivity checks. 5. For BHCs, the staff’s solvency stress tests over the initial stressed period are largely in line with the DFAST results, and suggest that the system is generally robust, although some BHCs would fall below the hurdle rate in the stressed environment. 6. [IMF’s] Staff’s liquidity risk analysis suggests that most BHCs have enough liquid assets to meet a liquidity shock similar to the 2008/2009 event. 7. On the insurance side, stresses have a significant impact, especially in life insurance. 8. Calculations for managed funds underscore the liquidity risk in the asset management industry. 9. A network stress-test methodology was used to assess potential spillovers among the largest domestic GSIBs. 10. Nonbank financial institutions and markets account for a majority of systemic risk. 11. Market-price based stress tests were used to illustrate the importance of cross-sectoral spillovers under stress. 12. While the authorities’ stress testing is state-of-the art in many respects, the exercise has suggested some scope for enhancements (Table 1). These include addressing data gaps by collecting interbank exposures for the whole sample of BHCs that were stress tested and conducting a network analysis on a regular basis; establishing a liquidity stress testing framework; trying to link liquidity, solvency and network analysis in a systemic risk stress testing framework; reexamining some of the solvency stress test assumptions to make them consistent with historical evidence, for example, as part of sensitivity analyses; as well as performing regular liquidity stress tests for open ended mutual funds and further strengthening the guidance to the industry on liquidity risk analysis."

Additional Nematrian Commentary This paper is indicative that regulators believe that systemic risks are not limited to banks but could also involve nonbank financial institutions including insurers and asset managers.

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