## Next Generation Balance Sheet Stress Testing

_IMF Working Papers, April 1, 2011_

## Source details

**Canonical URL:** [Next Generation Balance Sheet Stress Testing](https://www.imf.org/en/publications/wp/issues/2016/12/31/next-generation-balance-sheet-stress-testing-24798)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/next-generation-balance-sheet-stress-testing-24798/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/next-generation-balance-sheet-stress-testing-24798/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/next-generation-balance-sheet-stress-testing-24798/bundle-manifest.json)

## Bibliographic details
- Authors: Christian Schmieder, Maher Hasan, Claus Puhr
- Published: April 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455226054.001

---

### Framework overview
- Presents a "second-generation" solvency stress testing framework extending applied stress testing work centered on Cihák (2007).
- Seeks to enrich stress tests in terms of risk-sensitivity, while keeping them flexible, transparent, and user-friendly.
- Uses balance sheet data and is Excel-based with detailed guidance and documentation.
- Allows stress testers to run multi-year scenarios (up to five years) for hundreds of banks, depending on the availability of data.

### Main contributions and analytical enhancements
- Increases 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).
- Provides stress testers with a comprehensive platform to:
  - use satellite models;
  - define various assumptions and scenarios.
- Enables multi-year scenario analysis capability: up to five years for many banks.

### Features and implementation
- Excel-based implementation intended to be user-friendly and transparent.
- Detailed guidance and documentation accompany the framework.
- Designed for broad applicability depending on data availability (hundreds of banks).

### Key statistics and publication metadata
- Authors: Christian Schmieder, Maher Hasan, Claus Puhr
- Publication date: April 1, 2011
- Series: Working Paper No. 2011/083
- Issue: 083
- Volume: 2011
- Pages: 42
- DOI: https://doi.org/10.5089/9781455226054.001
- Stock No: WPIEA2011083
- ISBN: 9781455226054
- ISSN: 1018-5941
- Subject: Banking, Credit, Credit risk, Personal income, Stress testing
- Keywords: bank, income, IRB RWAs, WP

### Summary of substantive findings and capabilities
- Framework advances solvency stress testing by explicitly modeling RWA adjustments under stressed conditions.
- Introduces a quasi-IRB approach to extend RWA sensitivity to non-IRB banks.
- Supports use of auxiliary ("satellite") models to enrich scenario assumptions and transmission mechanisms.
- Designed to be scalable (hundreds of banks) and to support up to five-year stress scenarios for multi-year solvency assessment.

*Next Generation Balance Sheet Stress Testing, Christian Schmieder, Maher Hasan, Claus Puhr, April 1, 2011, IMF Working Papers 2011/083.*

---

## Content in this bundle

- **How to do a Meaningful Stress Test as a non-IRB Bank?**
  - [How to do a Meaningful Stress Test as a non-IRB Bank? (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp1183.pdf.md){rel="alternate" type="text/markdown"}
  - [How to do a Meaningful Stress Test as a non-IRB Bank? (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp1183.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/next-generation-balance-sheet-stress-testing-24798_