News: 2024.03.17
"Stress testing" is a guideline issued by the Hong Kong Monetary Authority to banks in 2010, which is intended to confirm customers' ability to withstand rising interest rates. In the past, when customers applied for a mortgage, assuming that the current interest rate increased by 2%, their "payment-to-income ratio" became an important consideration. However, in recent years some have questioned the need for the test, arguing that removing the stress test would ease the burden on first home buyers.
The myth behind eliminating stress tests is that it ignores uncertainty in financial markets. Interest rate fluctuations, economic changes and other factors may have an impact on mortgage loans. If customers are unable to cope with these changes, financial risks will increase. Therefore, the establishment of stress testing is reasonable and helps ensure the financial stability of customers.
From a bank's perspective, stress testing is also necessary. By assessing customers' ability to pay, banks can better control risks and avoid a large number of non-performing loans. This not only helps maintain financial stability, but also contributes to the sustainable development of the bank itself.
Although the existence of stress testing is necessary, it should also be continuously improved and improved. For example, different stress test standards can be set for different customer groups to more accurately assess their ability to contribute. At the same time, banks should provide more support and counseling to help customers deal with possible financial risks.
Overall, eliminating stress testing is not the answer. Instead, the interests of customers and banks should be better protected by improving existing testing mechanisms. Only with the joint efforts of both parties can the stability and sustainable development of the financial market be achieved.