Next Generation Balance Sheet Stress Testing

By Christian Schmieder, Maher Hasan, Claus Puhr

April 1, 2011

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Format: Chicago

Christian Schmieder, Maher Hasan, and Claus Puhr. Next Generation Balance Sheet Stress Testing, (USA: International Monetary Fund, 2011) accessed September 18, 2024

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 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.

Subject: Banking, Credit, Credit risk, Personal income, Stress testing

Keywords: Bank, Income, IRB RWAs, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/083
Stock No:

WPIEA2011083
ISBN:

9781455226054
ISSN:

1018-5941

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