PMA Issues New Instructions to Banks on Stress Testing
In its pursuit to stay up to date with the latest developments in stress testing in-line with best international practices, particularly the Basel Committee principles and updates on sound stress testing practices, and for the purpose of enhancing the efficiency of tests employed by banks as a risk management tool, the PMA issued new instructions on stress testing. These instructions included the rules and the minimum requirements to be observed by banks operating in Palestine. Banks constitute the backbone of the Palestinian financial system and therefore require greater focus on the monitoring and follow-up of potential risks. These instructions will consequently promote bank capability to absorb various financial shocks and ultimately reflect positively on the stability of the entire financial sector.
It is worth mentioning that the PMA had previously issued instructions in that regard in 2011. The new instructions are intended to increase the efficiency of stress tests conducted by banks, to allow the effective direction of administrative activities and to feed into the capital and liquidity planning process, and additionally promote better integration between stress testing conducted by the PMA and that conducted by the banks.
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