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Stress testing loan portfolios in times of crisis

Stress testing loan portfolios in times of crisis

Credit risk trends facing the Financial Services industry in 2020

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Credit risk trends facing the Financial Services industry in 2020

Paper 2, February 2020

Loan portfolios may be abruptly impacted due to the coronavirus outbreak, which could lead to correlated increases in default risk, higher provision rates, and an overall increase in credit risk. Although specific guidance on targeted stress tests due to the outbreak has not been issued by the HKMA, we would recommend banks to run targeted stress tests to identify vulnerable credit, sectors and supply chains, and then take proactive action.

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