Other Scenarios - Liquidity Stress (also see ILAA) Sample for a Banking Sector

                         Other Scenarios - Liquidity Stress (also see ILAA) Sample for a Banking Sector

PART: 17

11.4.3. Liquidity Stress (also see ILAA)

The Banks Treasury area conducts regular, monthly deposit stress tests for several scenarios. The Bank assumes a 30% withdrawal of resident and 10% withdrawal of non-resident deposits instantly. Each half-year and when required by ICAAP a “doomsday” stress test is conducted, whereby 40% of resident and non-resident deposits are deemed to have been withdrawn.

At the time of writing, and with the exception of EURO, the Bank experiences a surplus of the main currencies (Dolar and Euro) within the boundaries of both types of test in these scenarios.

As a measure of comfort during stress times, the group Chairman has confirmed that group companies (sister / parent) will  buy back the outstanding non-resident corporate loans and/or bills in the portfolio to improve liquidity.

The Bank will be increasing its borrowing prospects, in times of crisis, by purchasing USA Gilts with maturities up to 10 years and maintaining an adequate balance on its Bank of Brazil reserve account.

The Bank may also consider using the option to convert part of its capital into EURO to support the assets denominated in EURO, if the market stresses make it difficult to find swap counterparties. The parent Bank has already expressed its agreement to do this.