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M‐PRESS‐CreditRisk: Microprudential and Macroprudential Capital Requirements for Credit Risk under Systemic Stress

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  • NATALIA TENTE
  • NATALJA VON WESTERNHAGEN
  • ULF SLOPEK

Abstract

M‐PRESS‐CreditRisk is a novel stress testing approach that can help authorities gauge banks' capital adequacy related to credit risk. For the first time, it combines the assessment of microprudential capital requirements under Pillars 1 and 2 and macroprudential buffers in a unified, coherent framework. Its core element is an advanced credit portfolio model—SystemicCreditRisk—built upon a rich, nonlinear dependence structure for correlated bank portfolios. The model is applied to a sample of 12 systemically important German banking groups and delivers measures for systemic credit risk and the banks' contributions to it in both baseline and stress scenarios.

Suggested Citation

  • Natalia Tente & Natalja Von Westernhagen & Ulf Slopek, 2019. "M‐PRESS‐CreditRisk: Microprudential and Macroprudential Capital Requirements for Credit Risk under Systemic Stress," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(7), pages 1923-1961, October.
    • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:7:p:1923-1961
    DOI: 10.1111/jmcb.12636
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