Regular Publications

As a common practice worldwide, the Banking Supervision Department carries out a  macroeconomic stress test of the banking system, based on a uniform scenario since 2012. The goal of the process is to better understand the risk foci to which the banking system and each of the banks are exposed. In this way the analysis assists in evaluating the strength and resilience of the system and ensuring the existence of a sufficient level of capital relative to the risk that originates from those sources. In addition, the test makes it possible to evaluate the banks’ risk management processes, identify areas of vulnerability, and assess the banks’ ability to estimate the risks that threaten them in a stress situation. In this context, the banks also evaluate the effects of a scenario built by the Bank of Israel Research Department using a variety of accepted models and methods, while the Banking Supervision Department examines the expected effect of the scenario on each of the banks individually and on the banking system as a whole using a uniform method. The performance of these stress tests over the years has contributed to the strengthening of capital in the banking system and its adaptation to the risk profile of the banks and the domestic economy, as well as helping to improve the management of risk in the banking system.