In light of uncertainties in global economic and financial conditions, including U.S. tariff policies, the Financial Supervisory Commission ("the FSC") requested 38 domestic banks to conduct the "2025 Supervisory Stress Test" to understand the risk-bearing capacity of domestic banks under unfavorable conditions. The banks were required to calculate the changes in capital adequacy ratios and the leverage ratio based on the capital adequacy data as of the end of 2024 under consistent stress test scenarios.
　　The test scenarios included an adverse scenario and a severely adverse scenario. The scenario factors included decreased economic growth rates in Taiwan and major countries, increased domestic unemployment rates, and decreased housing prices, which increased expected losses in credit risk, increased losses due to market risk exacerbated by the heightened volatility in the prices of bonds, equities, foreign exchange, and commodities, as well as the impacts of narrowing interest margins and reduced fee and commission income on earnings. Under the severely adverse scenario, the FSC further increased the stress intensity for domestic and international economic growth rates, default rates, and the level of declines in housing prices and stock markets to assess banks' resilience under adverse conditions such as U.S. tariffs and uncertainties in the financial market.
　　The results of the stress test showed that the average Common Equity Tier 1 ratio, Tier 1 capital ratio, capital adequacy ratio, and leverage ratio of 38 domestic banks under the adverse scenario were 10.68%, 11.85%, 13.74%, and 6.05%, respectively; the ratios under the severely adverse scenario were 9.41%, 10.58%, 12.35%, and 5.44%, respectively. All ratios were above the statutory minimum standards (7%, 8.5%, 10.5%, and 3%, respectively, for the four aforementioned ratios). These results indicate that domestic banks have maintained strong risk-bearing capacity and capital adequacy in response to the changes in the global economy and financial environment.
　　According to the FSC, the test results indicated that the potential increase in losses under stress conditions may place a certain level of pressure on banks' profitability but would remain within their tolerance. The overall loan loss provisions of domestic banks remain at a relatively high level and their capital adequacy remains sound. The FSC will continue to monitor overall risks of the banks and ensure that they continuously improve their asset quality and financial structure to adapt to changes in the business environment, enhance their loss provisions and increase the capacity to bear risk.