Stress Test for Risk Assessment Under Basel Framework Applied in Banking Industry

7 Pages Posted: 28 Mar 2014

See all articles by Maheswaran Mahalingam

Maheswaran Mahalingam

Suresh Gyan Vihar University

D. N. Rao

Lingaya's University

Date Written: March 28, 2014

Abstract

Stress testing in Banks is crucial for risk mitigation both from regulatory and managerial standpoint. The U.S. sub-prime crisis of 2008 triggered economic recession across the globe and various agencies like financial institutions, regulators, credit agencies, government policies, and consumers, among others (Phil Angelides et al 2012) were collectively seen a part of systemic breakdown. Across the globe, the Central Banks have been advocating Stress Tests from the macro-prudential view point and created advanced risk analytical framework to predict scenarios impacting capital adequacy.

The paper which is more of a conceptual paper presents a brief review of various risk analytical methodologies including Macro Economic Stress Testing, Quantitative Computation of Stress Test Quantitative Computation of Stress Test etc. The paper also presents scope for future research on practice of stress tests in Indian Banks.

Keywords: Financial Risk, Bassel, Capital Adequacy, Banks, Credit Risk, delinquency, risk mitigation

JEL Classification: ARN, FRN

Suggested Citation

Mahalingam, Maheswaran and Rao, Dabbeeru Neelakanteswar, Stress Test for Risk Assessment Under Basel Framework Applied in Banking Industry (March 28, 2014). Available at SSRN: https://ssrn.com/abstract=2417156 or http://dx.doi.org/10.2139/ssrn.2417156

Maheswaran Mahalingam

Suresh Gyan Vihar University ( email )

Mahal
Jagatpura
Jaipur, RI Rajasthan 302017
India

Dabbeeru Neelakanteswar Rao (Contact Author)

Lingaya's University ( email )

Jasana Road
Nachauli
Old Faridabad, Haryana 121002
India
+919971510666 (Phone)

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