Japanese banks to undergo stress test to assess defenses: source

The banks' capital and liquidity positions will be evaluated.

Reuters reports that Japan’s major financial institutions are set to undergo a stress test to prepare for any major shakeout in financial markets, according to sources. 

Also read: Japanese bank woes to persist as ultra-low rates to last until 2020

The stress test will be overseen by the Bank of Japan and the Financial Services Agency (FSA), which will assess the results to see how capital and liquidity on-hand would be affected if stocks took a tumble and the yen spiked, the sources said.

Seven Japanese institutions will be subject to the stress test, including the three mega banks designated as G-SIBs, or global systemically important banks, and four other domestic systemically important banks dubbed D-SIBs.

This marks the first time that the BOJ and FSA will coordinate to manage the stress test. Previously, each financial institution has drawn up their own scenarios when conducting stress tests, the results of which were examined by the FSA.

Here's more from Reuters: