From Stress to Costress : Stress Testing Interconnected Banking Systems

Author/Editor:

Rodolfo Maino ; Kalin I Tintchev

Publication Date:

February 1, 2012

Electronic Access:

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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:

This paper presents an integrated framework for assessing systemic risk. The framework models banks’ capital asset ratios as a function of future losses and credit growth using a generalized method of moments to calibrate shocks to credit quality and credit growth. The analysis is complemented by a simple measure of systemic risk, which captures tail risk comovement among banks in the system. The main contribution of this paper is to advance a simple framework to integrate systemic risk scenarios that assess the impact of aggregate and idiosyncratic factors. The analysis is based on CreditRisk+, which uses analytical techniques—similar to those applied in the insurance industry - to estimate banks’ credit portfolio loss distributions, making no assumptions about the cause of default.

Series:

Working Paper No. 12/53

Subject:

English

Publication Date:

February 1, 2012

ISBN/ISSN:

9781475502220/1018-5941

Stock No:

WPIEA2012053

Format:

Paper

Pages:

34

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