Applying the Stress Test Scenarios on the Jordanian Commercial Banks

Prof. Dr. Assad Hameed  Anood Jrais Alkasos, Assistant

	Applying the Stress Test Scenarios on the Jordanian Commercial Banks
AL-dananeer
Article 1, Volume 1, Issue 7, 2018, Pages 490-519
Author
Assistant prof. Dr. Assad Hameed Anood Jrais Alkasos
Abstract
The study aimed to apply the stress testing scenarios, on the (13) Jordanian commercial banks listed at Amman Stock Exchange on 2012,the significance of these tests is to reveal the Jordanian commercial banking reality, and verifying its ability to endure various future risks in impartiality and transparency.The study addressed to apply two types of scenarios: the single factor and the multi factors scenarios. The required data obtained from bank income statements and the balance sheet.After applying the single variable scenarios, the results of capital adequacy ratio related to credit risk have shown that some banks are in an unsafe position in the worst case scenario, represented in an increase in the rate of non-operating credit facilities to 100%, 200%. In regard to the risk market, the bond portfolios have shown aprobability of downturn .The operational risk results shown that all banks exceeded the tests except for a single bank that failed to exceed all risks.For the multi factor tests, the results indicated the inability of four banks to exceed both scenarios, five scenarios results shown inability to exceed the test in case of worst scenarios achieve, that represented in an increase in the non-operating credit facilities up to 10% and a decrease in bond and shares portfolios prices up to 50%. Three banks have the ability to pass the two scenarios.Generally, the results did not support the notion that Jordanian commercial banks are in a safe position to face any severe future adversity. Where they fell in different categories according to the risks they’ve been subjected to, and their points of weakness became apparent in both market and credit risks. At the end of the study, some recommendations have been demonstrated, that aiming to show the importance of testing and their periodical application so that banks can prepare a plan to face the worst events.

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