Assessment of “stress tests” conducted on the French banking system
AbstractDuring the first quarter of 2004, the General Secretariat of the Commission bancaire (SGCB) and the Directorate General Economics and International Relations (DGEI) of the Banque de France conducted an assessment of the stability of the French banking system and its capacity to withstand a set of macroeconomic and financial shocks, as part of a broader evaluation of the French financial system carried out under the auspices of the IMF’s Financial Sector Assessment Program (FSAP). The assessment employed a macro-prudential approach which seeks to quantify the effects of shocks to the banking system using “stress tests”. The tests measured the impact of severe shocks, deemed plausible but infrequent: e.g., a recession, a large movement in interest rates, an oil price shock, a sharp drop in stock prices. This report discusses in detail the principal characteristics of the “stress tests” and the innovations introduced during the French FSAP, including in particular the design of coherent scenarios, which were developed using the DGEI’s macroeconomic model and the SGCB’s financial models for measuring risk. The results of the assessment indicate that, given the high average solvency ratio, the French banking system is currently in a position to withstand a major macroeconomic shock, such as a prolonged recession lasting two years. This type of shock would, however, erode the quality of bank assets and reduce bank profits by 38.5% in the second year, compared with the baseline, resulting in a decline in the international solvency ratio of one percentage point (using the Basel I methodology) or two percentage points (using the new methodology proposed in the Basel II Accord). Other scenarios, such as a 32% depreciation of the dollar against the euro for two years or an increase of nearly 50% in the price of oil also for two years, would have more limited effects on net income and solvency ratios.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Banque de France in its journal Financial stability review.
Volume (Year): (2004)
Issue (Month): 5 (November)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Sebastiano Laviola & Juri Marcucci & Mario Quagliariello, 2006.
"Stress testing credit risk: experience from the italian FSAP,"
Banca Nazionale del Lavoro Quarterly Review,
Banca Nazionale del Lavoro, vol. 59(238), pages 269-291.
- Sebastiano Laviola & Juri Marcucci & Mario Quagliariello, 2006. "Stress testing credit risk: experience from the italian FSAP," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 59(238), pages 269-291.
- Albert, Jose Ramon G. & Ng, Thiam Hee, 2012.
"Assessing the Resilience of ASEAN Banking Systems: the Case of the Philippines,"
DP 2012-23, Philippine Institute for Development Studies.
- Albert, Jose Ramon & Ng, Thiam Hee, 2012. "Assessing the Resilience of ASEAN Banking Systems: The Case of the Philippines," Working Papers on Regional Economic Integration 93, Asian Development Bank.
- Bardos, Mireille & Moquet, Jeremy & Kendaoui, Ludovic & Jardet, Caroline & Avouyi-Dovi, Sanvi, 2009.
"Macro stress testing with a macroeconomic credit risk model : Application to the French manufacturing sector,"
Economics Papers from University Paris Dauphine
123456789/11161, Paris Dauphine University.
- Avouyi-Dovi, S. & Bardos, M. & Jardet, C. & Kendaoui, L. & Moquet , J., 2009. "Macro stress testing with a macroeconomic credit risk model: Application to the French manufacturing sector," Working papers 238, Banque de France.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Christine Petit-Djemad).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.