It is definitely hard to accurately tell how specific banks have perfomed under stress test conditions without knowing the specific assumptions applied in carrying out the tests. This is because the stress test results tend to be driven by the risk profile of a banks assets as proxied by the quality of counterparties and collaterals,and other information not publicly available. Specifically,stress tests tend to use more granular information relating to the various exposures by the bank taking into account the various risks that could arise and their likely impact on capital position.
The assumption could include decrease in value of the investment portfolio,drop in the value of collaterals,increase in default rates,risks as a result of concentration to certain group of clients or sectors,and run on deposits and fire sale of assets.
The information to carry out the stress tests are normally obtained from the prudential information submitted by the banks to the supervisory body or through specific request for additional information from individual banks by the supervisory body. These information could include; Loan-to-Value ratios (LTV),Debt Service Ratios (DSR),credit concentration information,quality of loans,and asset and liability mismatches giving rise to FX and/or interest rate risks.
Creating a culture of risk awareness