Next Generation Balance Sheet Stress Testing

Author/Editor:

Christian Schmieder ; Maher Hasan ; Claus Puhr

Publication Date:

April 1, 2011

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 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.

Series:

Working Paper No. 11/83

Subject:

Frequency:

Biannually

English

Publication Date:

April 1, 2011

ISBN/ISSN:

9781455226054/1018-5941

Stock No:

WPIEA2011083

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

42

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