Bangladesh Bank (BB) has updated its stress testing guidelines to enhance the banking sector’s resilience by requiring banks to disclose information on both their portfolios and those of their subsidiaries. The revised rules also clarify the roles and responsibilities of senior management and board directors, areas previously lacking clear guidance. Banks must now take preventive actions in adverse economic scenarios and assess risks related to credit, market, operational, and liquidity factors.
The new guidelines introduce a sensitivity analysis approach that includes climate shocks in operational risk assessments. Banks will now evaluate the impact of climate-related vulnerabilities on their loan portfolios, with a focus on flood-prone areas. Liquidity risk assessments will consider deposit withdrawals and shocks to the Liquidity Coverage Ratio (LCR). The changes, influenced by IMF recommendations, aim to provide a more accurate, bank-specific risk assessment, aligning BB’s practices with global standards and improving market risk analysis.
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