Rural banks will soon be subjected to stress tests

Posted at 11/23/12 6:03 PM

MANILA, Philippines - Rural banks will be subjected to "stress tests" to measure their resiliency in case the global economic crisis worsens, the Bangko Sentral ng Pilipinas (BSP) said.

The BSP will include rural banks and more thrift banks in the next round of stress tests, which are conducted once every semester. Universal and commercial banks are usually covered by the stress tests.

BSP Deputy Governor Nestor Espenilla Jr. said it is important to determine the resiliency of thrift and rural banks, to guide the central bank in its efforts to keep the financial system stable.

Espenilla noted the failure of rural and thrift banks may also affect the entire financial system.

"Some argue we (BSP) do not need to subject all banks to the stress tests. However … systemic risk is an interaction of causes and effects. If only dominant banks are covered, we might overlook the risk of a single part causing an entire house to be on fire," he said.

In the past stress tests, Espenilla said universal, commercial and some thrift banks generally are resilient to risks.