Stress tests as a modern method to achieve financial stability - Studying the Omani experience during the Covid-19 crisis-

Abstract

This study aimed to analyze the role of stress tests in measuring the ability of Omani banks to withstand the shocks resulting from the negative repercussions of the Corona epidemic, in accordance with the procedures and measures taken by the Central Bank of Oman during the crisis. In addition to the stress tests applied to the Omani banking sector according to different scenarios.

The study concluded that the Omani banking system is still generally able to withstand shocks and high risks. The results indicate that local banks will absorb losses comfortably under moderate aggregate stress scenarios, as the capital adequacy ratio of local banks will decrease from its current level of 18.1% to 15.3%. Banks will also maintain the ratio of capital to risk-weighted assets at a level exceeding Basel requirements of 10.5%, according to severe stress scenarios. The results also showed that bank loans were of high quality, as the percentage of non-performing loans remained at low levels, as the reverse stress test showed that the current total non-performing loans at local banks may increase by at least 100% before the minimum ratio of capital to weighted assets is breached. risks with local banks. In addition, banks enjoy acceptable liquidity and the necessary flexibility to withstand potential shocks to local liquidity, as they have comfortable liquidity rates compared to international standards