Central Bank Balance Sheet Stress Testing

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Central Bank Balance Sheet Stress Testing

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Bibliographic details

• Published: August 22, 2025

Course overview

• The course provides a rigorous quantitative framework for conducting stress tests on a central bank's balance sheet and profit and loss statements.
• The course explains how to model a central bank's balance sheet, adapting the framework to reflect country-specific characteristics.
• Key topics include stress testing central bank equity, analyzing driving factors of profits and losses, evaluating strategies to strengthen financial resilience—such as recapitalization—and developing satellite models to forecast critical balance sheet components.
• Through this comprehensive approach, the course enhances participants' ability to assess the financial soundness of central banks under various macroeconomic and non-macroeconomic scenarios.

Target audience and qualifications

• Target Audience:
  • Mid- to senior-level central bank officials interested in conducting stress tests on central bank's balance sheet, working in macroeconomic research, accounting, or foreign reserve management departments.
• Qualifications:
  • Participants are expected to have experience in central bank operations, financial markets, and basic knowledge of quantitative methods.
  • Programming skills in Matlab or R are a plus.

Course objectives

Upon completion of the course, participants should be able to:

• Forecast central bank's balance sheet by comprehensively incorporating various factors, such as macroeconomic variables and operating income and expenses.
• Construct adverse scenarios tailored for stress testing central bank's balance sheet.
• Examine key risks which drive central bank's balance sheet and profits and losses.
• Assess different policy options to strengthen central bank's balance sheet.

Practical skills and policy relevance

• Quantitative modeling:
  • Build and adapt balance sheet models to reflect country-specific characteristics.
  • Develop satellite models to forecast critical balance sheet components.
• Risk analysis:
  • Identify and analyze driving factors of profits and losses.
  • Stress test central bank equity under adverse macroeconomic and non-macroeconomic scenarios.
• Policy assessment:
  • Evaluate strategies to strengthen financial resilience, including recapitalization and other policy options.