Macroprudential Stress Tests And Policies Searching For Robust And Implementable Frameworks
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Macroprudential Stress Tests And Policies Searching For Robust And Implementable Frameworks
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Author : Ron Anderson
language : en
Publisher: International Monetary Fund
Release Date : 2018-09-11
Macroprudential Stress Tests And Policies Searching For Robust And Implementable Frameworks written by Ron Anderson and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-09-11 with Business & Economics categories.
Macroprudential stress testing (MaPST) is becoming firmly embedded in the post-crisis policy-frameworks of financial-sectors around the world. MaPSTs can offer quantitative, forward-looking assessments of the resilience of financial systems as a whole, to particularly adverse shocks. Therefore, they are well suited to support the surveillance of macrofinancial vulnerabilities and to inform the use of macroprudential policy-instruments. This report summarizes the findings of a joint-research effort by MCM and the Systemic-Risk-Centre, which aimed at (i) presenting state-of-the-art approaches on MaPST, including modeling and implementation-challenges; (ii) providing a roadmap for future-research, and; (iii) discussing the potential uses of MaPST to support policy.
Designing Effective Macroprudential Stress Tests
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Author : Mr.Dimitri G. Demekas
language : en
Publisher: International Monetary Fund
Release Date : 2015-06-30
Designing Effective Macroprudential Stress Tests written by Mr.Dimitri G. Demekas and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-06-30 with Business & Economics categories.
Giving stress tests a macroprudential perspective requires (i) incorporating general equilibrium dimensions, so that the outcome of the test depends not only on the size of the shock and the buffers of individual institutions but also on their behavioral responses and their interactions with each other and with other economic agents; and (ii) focusing on the resilience of the system as a whole. Progress has been made toward the first goal: several models are now available that attempt to integrate solvency, liquidity, and other sources of risk and to capture some behavioral responses and feedback effects. But building models that measure correctly systemic risk and the contribution of individual institutions to it while, at the same time, relating the results to the established regulatory framework has proved more difficult. Looking forward, making macroprudential stress tests more effective would entail using a variety of analytical approaches and scenarios, integrating non-bank financial entities, and exploring the use of agent-based models. As well, macroprudential stress tests should not be used in isolation but be treated as complements to other tools and—crucially—be combined with microprudential perspectives.
Macroprudential Stress Tests A Reduced Form Approach To Quantifying Systemic Risk Losses
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Author : Zineddine Alla
language : en
Publisher: International Monetary Fund
Release Date : 2018-03-09
Macroprudential Stress Tests A Reduced Form Approach To Quantifying Systemic Risk Losses written by Zineddine Alla and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-03-09 with Business & Economics categories.
We present a novel approach that incorporates individual entity stress testing and losses from systemic risk effects (SE losses) into macroprudential stress testing. SE losses are measured using a reduced-form model to value financial entity assets, conditional on macroeconomic stress and the distress of other entities in the system. This valuation is made possible by a multivariate density which characterizes the asset values of the financial entities making up the system. In this paper this density is estimated using CIMDO, a statistical approach, which infers densities that are consistent with entities’ probabilities of default, which in this case are estimated using market-based data. Hence, SE losses capture the effects of interconnectedness structures that are consistent with markets’ perceptions of risk. We then show how SE losses can be decomposed into the likelihood of distress and the magnitude of losses, thereby quantifying the contribution of specific entities to systemic contagion. To illustrate the approach, we quantify SE losses due to Lehman Brothers’ default.
A Framework For Macroprudential Bank Solvency Stress Testing
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Author : Mr.Andreas A. Jobst
language : en
Publisher: International Monetary Fund
Release Date : 2013-03-13
A Framework For Macroprudential Bank Solvency Stress Testing written by Mr.Andreas A. Jobst and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-03-13 with Business & Economics categories.
The global financial crisis has placed the spotlight squarely on bank stress tests. Stress tests conducted in the lead-up to the crisis, including those by IMF staff, were not always able to identify the right risks and vulnerabilities. Since then, IMF staff has developed more robust stress testing methods and models and adopted a more coherent and consistent approach. This paper articulates the solvency stress testing framework that is being applied in the IMF’s surveillance of member countries’ banking systems, and discusses examples of its actual implementation in FSAPs to 18 countries which are in the group comprising the 25 most systemically important financial systems (“S-25”) plus other G-20 countries. In doing so, the paper also offers useful guidance for readers seeking to develop their own stress testing frameworks and country authorities preparing for FSAPs. A detailed Stress Test Matrix (STeM) comparing the stress test parameters applie in each of these major country FSAPs is provided, together with our stress test output templates.
Macroprudential Solvency Stress Testing Of The Insurance Sector
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Author : Mr. Andreas A. Jobst
language : en
Publisher: International Monetary Fund
Release Date : 2014-07-22
Macroprudential Solvency Stress Testing Of The Insurance Sector written by Mr. Andreas A. Jobst and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-07-22 with Business & Economics categories.
Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.
Stress Testing At The Imf
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Author : Mr.Tobias Adrian
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-05
Stress Testing At The Imf written by Mr.Tobias Adrian and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-02-05 with Business & Economics categories.
This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.
Stress Testing Financial Systems
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Author : Mr.Matthew T Jones
language : en
Publisher: International Monetary Fund
Release Date : 2004-09-27
Stress Testing Financial Systems written by Mr.Matthew T Jones and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-09-27 with Business & Economics categories.
Stress testing is becoming a widely used tool to assess potential vulnerabilities in a financial system. This booklet is intended to answer some of the basic questions that may arise as part of the process of stress testing. The pamphlet begins with a discussion of stress testing in a financial system context, highlighting some of the differences between stress tests of systems and of individual portfolios. The booklet provides an overview of the process itself, from identifying vulnerabilities, to constructing scenarios, to interpreting the results. The experience of the IMF in conducting stress testing as part of the Financial Sector Assessment Program (FSAP) is also discussed.
Macroprudential Policy An Organizing Framework Background Paper
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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2011-03-14
Macroprudential Policy An Organizing Framework Background Paper written by International Monetary Fund. Monetary and Capital Markets Department and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-03-14 with Business & Economics categories.
MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.
Credibility And Crisis Stress Testing
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Author : Ms. Li L. Ong
language : en
Publisher: International Monetary Fund
Release Date : 2013-08-09
Credibility And Crisis Stress Testing written by Ms. Li L. Ong and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-08-09 with Business & Economics categories.
Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.
Towards Macroprudential Stress Testing
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Author : Mr.Ivo Krznar
language : en
Publisher: International Monetary Fund
Release Date : 2017-06-30
Towards Macroprudential Stress Testing written by Mr.Ivo Krznar and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-06-30 with Business & Economics categories.
Macro-feedback effects have been identified as a key missing element for more effective macro-prudential stress testing. To fill this gap, this paper develops a framework that facilitates the analysis of both the direct effects of macroeconomic shocks on the solvency of individual banks and feedback effects that allow for the amplification and propagation of shocks that can result from bank deleveraging and credit crunches. The framework ensures consistency in the key relationships between macroeconomic and financial variables, and banks’ balance sheets. This is accomplished by embedding a standard stress-testing framework based on individual banks’ data in a semi-structural macroeconomic model. The framework has numerous applications that can strengthen stress testing and macro financial analysis. Moreover, it provides an avenue for many extensions that address the challenges of incorporating other second-round effects important for comprehensive systemic risk analysis, such as interactions between solvency, liquidity and contagion risks. To this end, the paper presents some preliminary simulations of feedback effects arising from the link between the liquidity and solvency risk.