Rules of Thumb for Bank Solvency Stress Testing

Author/Editor: Daniel C. Hardy ; Christian Schmieder
Publication Date: November 11, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 13/232
Subject(s): Banks | Banking crisis | Stress testing | Economic models

Publication Date: November 11, 2013
ISBN/ISSN: 9781475518115/1018-5941 Format: Paper
Stock No: WPIEA2013232 Pages: 67
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