61 Pages Posted: 2 Feb 2012
Date Written: Janurary 2012
A framework to run system-wide, balance sheet data-based liquidity stress tests is presented. The liquidity framework includes three elements: (a) a module to simulate the impact of bank run scenarios; (b) a module to assess risks arising from maturity transformation and rollover risks, implemented either in a simplified manner or as a fully-fledged cash flow-based approach; and (c) a framework to link liquidity and solvency risks. The framework also allows the simulation of how banks cope with upcoming regulatory changes (Basel III), and accommodates differences in data availability. A case study shows the impact of a "Lehman" type event for stylized banks.
Keywords: Bank supervision, Banks, Financial risk, Liquidity management, Risk management
Suggested Citation: Suggested Citation
Hesse, Heiko and Schmieder, Christian and Puhr, Claus and Neudorfer, Benjamin and Schmitz, Stefan W., Next Generation System-Wide Liquidity Stress Testing (Janurary 2012). IMF Working Paper No. 12/3. Available at SSRN: https://ssrn.com/abstract=1997716