Macroprudential Supervision and Agents’ Information: What Stress Tests Really Tell the Markets

40 Pages Posted: 15 Jul 2020

See all articles by Fausto Pacicco

Fausto Pacicco

LIUC - Università Cattaneo

Luigi Vena

LIUC - Università Cattaneo

Andrea Venegoni

LIUC Università Cattaneo

Date Written: June 17, 2020

Abstract

Central banks' macro-prudential supervisory activities have to fulfill three distinct tasks:

(i) assessing banking system's vulnerability to exogenous adverse turbulence,

(ii) evaluating the risk of systemic crisis originating from idiosyncratic shocks and

(iii) measuring financial markets' sensitivity to policy stimuli.

Being macro-prudential stress tests the centerpiece of this policy approach a question arises: are they up to the task? Studying how 2011 to 2018 EBA stress tests affected market risk perception, we show that they provided agents with valuable information on the policy stance and on the vulnerability of the banking system, serving their function especially under the second and third dimensions.

Keywords: Disclosure Policy, Macro-prudential Supervision, Risk Assessment, Market Reaction, Stress Tests

JEL Classification: C32, G12, G14, G28

Suggested Citation

Pacicco, Fausto and Vena, Luigi and Venegoni, Andrea, Macroprudential Supervision and Agents’ Information: What Stress Tests Really Tell the Markets (June 17, 2020). Available at SSRN: https://ssrn.com/abstract=3630091 or http://dx.doi.org/10.2139/ssrn.3630091

Fausto Pacicco (Contact Author)

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Luigi Vena

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Andrea Venegoni

LIUC Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

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