Bank Stress Tests as an Information Device for Emerging Markets: The Case of Russia
AbstractThe recent financial crisis emphasized the need for effective financial stability analyses and tools for detecting systemic risk. This paper looks at the assessment of banking sector resilience through stress testing. We argue such analyses are valuable even in emerging economies, which suffer from limited data availability, short time series, and structural breaks. We propose a top-down stress test methodology that employs relatively limited information to overcome this data problem. Moreover, as credit growth in emerging economies tends to be rather volatile, we rely on a dynamic approach projecting key balance sheet items. The application of our proposed stress test framework to the Russian banking sector reveals high sensitivity of the capital adequacy ratio to the economic cycle. This shows up in both of the two-year macroeconomic scenarios considered: a baseline and an adverse one. Both scenarios indicate a need to increase the capital of the Russian banking sector. Furthermore, given that Russia’s banking sector is small and fragmented by comparison with advanced economies, a loss of external financing could cause profound economic stress, especially for small and medium-sized enterprises. The Russian state has a low public debt-to-GDP ratio and plays a decisive role in the banking sector. These factors allow sufficient fiscal space for recapitalization of problematic banks under our proposed baseline and adverse scenarios.
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 Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.
Volume (Year): 63 (2013)
Issue (Month): 1 (March)
stress testing; bank; Russia;
Other versions of this item:
- Fungácová, Zuzana & Jakubík, Petr, 2012. "Bank stress tests as an information device for emerging markets: The case of Russia," BOFIT Discussion Papers 3/2012, Bank of Finland, Institute for Economies in Transition.
- Zuzana Fungáèová & Petr Jakubík, 2012. "Bank Stress Tests as an Information Device for Emerging Markets: The Case of Russia," Working Papers IES 2012/04, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2012.
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Boss & Martin Fenz & Johannes Pann & Claus Puhr & Martin Schneider & Eva Ubl, 2009. "Modeling Credit Risk through the Austrian Business Cycle: An Update of the OeNB Model," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 17, pages 85-101.
- Upper, Christian & Worms, Andreas, 2004.
"Estimating bilateral exposures in the German interbank market: Is there a danger of contagion?,"
European Economic Review,
Elsevier, vol. 48(4), pages 827-849, August.
- Upper, Christian & Worms, Andreas, 2002. "Estimating Bilateral Exposures in the German Interbank Market: Is there a Danger of Contagion?," Discussion Paper Series 1: Economic Studies 2002,09, Deutsche Bundesbank, Research Centre.
- Mathias Drehmann & Steffen Sorensen & Marco Stringa, 2008. "The integrated impact of credit and interest rate risk on banks: an economic value and capital adequacy perspective," Bank of England working papers 339, Bank of England.
- Gabriel Jiménez & Jesús Saurina, 2006. "Credit Cycles, Credit Risk, and Prudential Regulation," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
- World Bank & International Monetary Fund, 2005. "Financial Sector Assessment : A Handbook," World Bank Publications, The World Bank, number 7259, August.
- Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
- Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank, Research Centre.
- Michaela Posch & Stefan W. Schmitz & Beat Weber, 2009. "EU Bank Packages: Objectives and Potential Conflicts of Objectives," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 17, pages 63-84.
- Ian Levely, 2012. "Measuring Intermediate Outcomes of Liberia’s DDRR Program," Working Papers IES 2012/2, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2012.
- Virolainen , Kimmo, 2004. "Macro stress testing with a macroeconomic credit risk model for Finland," Research Discussion Papers 18/2004, Bank of Finland.
- Vernikov, Andrei, 2009. "Russian banking: The state makes a comeback?," BOFIT Discussion Papers 24/2009, Bank of Finland, Institute for Economies in Transition.
- Buncic, Daniel & Melecky, Martin, 2011.
"Macroprudential Stress Testing of Credit Risk: A Practical Approach for Policy Makers,"
Economics Working Paper Series
1139, University of St. Gallen, School of Economics and Political Science.
- Buncic, Daniel & Melecky, Martin, 2013. "Macroprudential stress testing of credit risk: A practical approach for policy makers," Journal of Financial Stability, Elsevier, vol. 9(3), pages 347-370.
- Buncic, Daniel & Melecky, Martin, 2012. "Macroprudential stress testing of credit risk : a practical approach for policy makers," Policy Research Working Paper Series 5936, The World Bank.
- Buncic, Daniel & Martin, Melecky, 2011. "Macroprudential stress testing of credit risk: A practical approach for policy makers," MPRA Paper 33927, University Library of Munich, Germany.
- Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, August.
- Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, August.
- Alesia Kalbaska, 2013. "From Sovereigns to Banks: Evidence on Cross-border Contagion (2006-2011)," Department of Economics University of Siena 680, Department of Economics, University of Siena.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova).
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.