A Macro Stress Testing Framework for Assessing Systemic Risks in the Banking Sector

82 Pages Posted: 16 Mar 2014

See all articles by Jerome Henry

Jerome Henry

European Central Bank (ECB)

Christoffer Kok

European Central Bank (ECB)

Adrien Amzallag

European Central Bank (ECB)

Patrizia Baudino

European Central Bank (ECB)

Inês Cabral

European Central Bank (ECB) - Directorate Financial Stability and Supervision

Maciej Grodzicki

European Central Bank (ECB)

Marco Gross

International Monetary Fund (IMF); European Central Bank (ECB)

Grzegorz Halaj

National Bank of Poland

Markus Kolb

European Central Bank (ECB)

Miha Leber

European Central Bank (ECB)

Cosimo Pancaro

European Central Bank (ECB)

Matthias Sydow

European Central Bank (ECB)

Angelos T. Vouldis

European Central Bank (ECB); Bank of Greece

Maik Zimmermann

European Central Bank (ECB)

Dawid Żochowski

European Central Bank

Date Written: October 9, 2013

Abstract

The use of macro stress tests to assess bank solvency has developed rapidly over the past few years. This development was reinforced by the financial crisis, which resulted in substantial losses for banks and created general uncertainty about the banking sector’s loss-bearing capacity. Macro stress testing has proved a useful instrument to help identify potential vulnerabilities within the banking sector and to gauge its resilience to adverse developments. To support its contribution to safeguarding financial stability and its financial sector-related work in the context of EU/IMF Financial Assistance Programmes, and looking ahead to the establishment of the Single Supervisory Mechanism (SSM), the ECB has developed a top-down macro stress testing framework that is used regularly for forward-looking bank solvency assessments. This paper comprehensively presents the main features of this framework and illustrates how it can be employed for various policy analysis purposes.

Keywords: macro stress test, systemic risk, financial crisis, banking sector, macro-prudential policy, micro-prudential supervision

JEL Classification: C53, D85, E37, E44, E47, E58, G01, G21, G28

Suggested Citation

Henry, Jerome and Kok, Christoffer and Amzallag, Adrien and Baudino, Patrizia and Cabral, Inês and Grodzicki, Maciej and Gross, Marco and Halaj, Grzegorz and Kolb, Markus and Leber, Miha and Pancaro, Cosimo and Sydow, Matthias and Vouldis, Angelos T. and Zimmermann, Maik and Żochowski, Dawid, A Macro Stress Testing Framework for Assessing Systemic Risks in the Banking Sector (October 9, 2013). ECB Occasional Paper No. 152. Available at SSRN: https://ssrn.com/abstract=2337894

Jerome Henry (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7614 (Phone)
+49 69 1344 6575 (Fax)

Christoffer Kok

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Adrien Amzallag

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Patrizia Baudino

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Inês Cabral

European Central Bank (ECB) - Directorate Financial Stability and Supervision ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Maciej Grodzicki

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Marco Gross

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Grzegorz Halaj

National Bank of Poland ( email )

00-919 Warsaw
Poland

Markus Kolb

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Miha Leber

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Cosimo Pancaro

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Matthias Sydow

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Angelos T. Vouldis

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

HOME PAGE: http://www.bankofgreece.gr

Maik Zimmermann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Dawid Żochowski

European Central Bank ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

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