Country Risk Management

Stress Testing

Banks should periodically stress-test their foreign exposures and report the results to the board of directors and senior management. As used here, stress testing does not necessarily refer to the use of sophisticated financial modeling tools but rather to the need for all banks to evaluate in some way the potential impact of different scenarios on their country risk profiles. The level of resources devoted to this effort should be commensurate with the significance of foreign exposures in the bank’s overall operations.

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