Next Generation Balance Sheet Stress Testing

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Next Generation Balance Sheet Stress Testing

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Author : Mr.Christian Schmieder
language : en
Publisher: International Monetary Fund
Release Date : 2011-04-01

Next Generation Balance Sheet Stress Testing written by Mr.Christian Schmieder 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 2011-04-01 with Business & Economics categories.

This paper presents a "second-generation" solvency stress testing framework extending applied stress testing work centered on Cihák (2007). The framework seeks enriching stress tests in terms of risk-sensitivity, while keeping them flexible, transparent, and user-friendly. The main contributions include (a) increasing the risk-sensitivity of stress testing by capturing changes in risk-weighted assets (RWAs) under stress, including for non-internal ratings based (IRB) banks (through a quasi-IRB approach); (b) providing stress testers with a comprehensive platform to use satellite models, and to define various assumptions and scenarios; (c) allowing stress testers to run multi-year scenarios (up to five years) for hundreds of banks, depending on the availability of data. The framework uses balance sheet data and is Excel-based with detailed guidance and documentation.

Next Generation System Wide Liquidity Stress Testing

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Author : Mr.Claus Puhr
language : en
Publisher: International Monetary Fund
Release Date : 2012-01-01

Next Generation System Wide Liquidity Stress Testing written by Mr.Claus Puhr 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 2012-01-01 with Business & Economics categories.

A framework to run system-wide, balance sheet data-based liquidity stress tests is presented. The liquidity framework includes three elements: (a) a module to simulate the impact of bank run scenarios; (b) a module to assess risks arising from maturity transformation and rollover risks, implemented either in a simplified manner or as a fully-fledged cash flow-based approach; and (c) a framework to link liquidity and solvency risks. The framework also allows the simulation of how banks cope with upcoming regulatory changes (Basel III), and accommodates differences in data availability. A case study shows the impact of a "Lehman" type event for stylized banks.

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.

Rules Of Thumb For Bank Solvency Stress Testing

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Author : Mr.Daniel C. Hardy
language : en
Publisher: International Monetary Fund
Release Date : 2013-11-11

Rules Of Thumb For Bank Solvency Stress Testing written by Mr.Daniel C. Hardy 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 2013-11-11 with Business & Economics categories.

Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.

A Guide To Imf Stress Testing

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Author : Ms.Li L Ong
language : en
Publisher: International Monetary Fund
Release Date : 2014-12-23

A Guide To Imf 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 2014-12-23 with Business & Economics categories.

The IMF has had extensive involvement in the stress testing of financial systems in its member countries. This book presents the methods and models that have been developed by IMF staff over the years and that can be applied to the gamut of financial systems. An added resource for readers is the companion CD-Rom, which makes available the toolkit with some of the models presented in the book (also located at elibrary.imf.org/page/stress-test-toolkit).

Macrofinancial Stress Testing Principles And Practices

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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2012-08-22

Macrofinancial Stress Testing Principles And Practices 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 2012-08-22 with Business & Economics categories.

The recent financial crisis drew unprecedented attention to the stress testing of financial institutions. On one hand, stress tests were criticized for having missed many of the vulnerabilities that led to the crisis. On the other, after the onset of the crisis, they were given a new role as crisis management tools to guide bank recapitalization and help restore confidence. This spurred an intense debate on the models, underlying assumptions, and uses of stress tests. Current stress testing practices, however, are not based on a systematic and comprehensive set of principles but have emerged from trial-and-error and often reflect constraints in human, technical, and data capabilities.

Introduction To Applied Stress Testing

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Author : Martin Cihák
language : en
Publisher: International Monetary Fund
Release Date : 2007-03

Introduction To Applied Stress Testing written by Martin Cihák 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 2007-03 with Business & Economics categories.

Stress testing is a useful and increasingly popular, yet sometimes misunderstood, method of analyzing the resilience of financial systems to adverse events. This paper aims to help demystify stress tests, and illustrate their strengths and weaknesses. Using an Excel-based exercise with institution-by-institution data, readers are walked through stress testing for credit risk, interest rate and exchange rate risks, liquidity risk and contagion risk, and are guided in the design of stress testing scenarios. The paper also describes the links between stress testing and other analytical tools, such as financial soundness indicators and supervisory early warning systems. Furthermore, it includes surveys of stress testing practices in central banks and the IMF.

Handbook Of Financial Stress Testing

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Author : J. Doyne Farmer
language : en
Publisher:
Release Date : 2022-04-14

Handbook Of Financial Stress Testing written by J. Doyne Farmer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-04-14 with Business & Economics categories.

Discover current uses and future development of stress tests, the most innovative regulatory tool to prevent and fight financial crises.

Financial Soundness Indicators Compilation Guide 2019

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Author : International Monetary Fund. Statistics Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2019-12-27

Financial Soundness Indicators Compilation Guide 2019 written by International Monetary Fund. Statistics Dept. 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 2019-12-27 with Business & Economics categories.

The 2019 Financial Soundness Indicators Compilation Guide (2019 Guide) includes new indicators to expand the coverage of the financial sector, including other financial intermediaries, money market funds, insurance corporations, pension funds, nonfinancial corporations, and households. In all, the 2019 Guide recommends the compilation of 50 FSIs—13 of them new. Additions such as new capital, liquidity and asset quality metrics, and concentration and distribution measures will serve to enhance the forward-looking aspect of FSIs and contribute to increase policy focus on stability of the financial system.

Georgia

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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2015-01-09

Georgia 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 2015-01-09 with Business & Economics categories.

The Georgian banking sector is sound and stable and has continued to perform well, but faces a number of key risks and vulnerabilities that need to be closely monitored. Particularly challenging among them are credit and funding risks related to dollarization, concentration in the banking sector, and reliance on nonresident deposits. While NPLs are gradually declining from their peak in 2009, credit growth is above its long-term sustainable trend. Dollarization presents specific challenges as it increases credit and liquidity risks. There are two major dollarization-related problems: First, most of the borrowers in U.S. dollars (USD) are unhedged, as their income and expenditures are in national currency (this is especially evident in case of households). Second, the NBG has limited ability to provide liquidity support in USD and other foreign currencies. However, it should be noted that the NBG is implementing a set of macroprudential measures aimed at making FX lending more expensive for banks. For example, current risk weights for FX loans are topped at 175 percent. Separate stress tests (STs) performed by the NBG and by the FSAP mission show that the banking system as a whole is able to withstand severe shocks, given that most banks maintain healthy capital buffers well above regulatory minimum. The tests were conducted in several scenarios ranging from slow growth to severe macroeconomic shocks, and the results show that major banks would generally remain adequately capitalized, taking into account current profits and introduction of Basel II. In adverse scenarios, recapitalization needs are manageable in terms of GDP (1.6 percent for the worst-case scenario). At the same time, uncertainty due to non-linearity of shocks related to lari depreciation warrant continuation of build-up of capital buffers as long as FX denominated loans constitute substantial share of banks’ loan portfolios. Credit portfolio concentration risks are limited: default by the largest three borrowers would require additional capital of GEL 50 million for five banks. Market risks are very limited, and trading books do not exist. However, some banks are particularly vulnerable and need to strengthen their capital buffers and to mitigate funding risks. These banks exceed the minimum capital requirement by only a few percentage points (p.p.), which limits their loss-absorption capacity. The high level of profitability and solid net interest margins would go down during crisis periods, driving down net interest and other income. To avoid this pitfall, it is important to introduce Individual Capital Guidance, especially for the weakest banks. When it comes to funding risks, further diversification of funding sources and de-dollarization could help to minimize identified vulnerabilities.