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The household stress test

Author

Listed:
  • Jiri Gregor
  • Hana Hejlova

Abstract

This article presents the methodology of the new stress test for households with a mortgage loan which the CNB uses to analyse the sector's resilience. Thanks to granular data on new mortgage loans and a forward-looking approach to simulating the overall mortgage portfolio, the test has a broad application for assessing the impacts of macroeconomic scenarios and calibrating macroprudential instruments. The article describes the main starting points and assumptions of the test. It also presents an application of the stress test using a three-year adverse scenario, for which the share of loans potentially at risk of default and, in turn, the share of non-performing loans are estimated.

Suggested Citation

  • Jiri Gregor & Hana Hejlova, 2020. "The household stress test," Occasional Publications - Chapters in Edited Volumes,, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:tafs2020/4
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    File URL: https://www.cnb.cz/export/sites/cnb/en/financial-stability/.galleries/thematic-articles-on-financial-stability/tafs_2020_04_en.pdf
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    References listed on IDEAS

    as
    1. Giordana, Gastón & Ziegelmeyer, Michael, 2020. "Stress testing household balance sheets in Luxembourg," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 115-138.
    2. Levina, Iren & Sturrock, Robert & Varadi, Alexandra & Wallis, Gavin, 2019. "Modelling the distribution of mortgage debt," Bank of England working papers 808, Bank of England.
    3. Dent, Kieran & Westwood, Ben & Segoviano, Miguel, 2016. "Stress testing of banks: an introduction," Bank of England Quarterly Bulletin, Bank of England, vol. 56(3), pages 130-143.
    4. Tom Bilston & Robert Johnson & Matthew Read, 2015. "Stress Testing the Australian Household Sector Using the HILDA Survey," RBA Research Discussion Papers rdp2015-01, Reserve Bank of Australia.
    5. Hana Hejlova & Libor Holub & Miroslav Plasil, 2018. "The introduction and calibration of macroprudential tools targeted at residential real estate exposures in the Czech Republic," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2017/2018, chapter 0, pages 126-135, Czech National Bank.
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    Cited by:

    1. Miroslav Plasil, 2021. "Designing Macro-Financial Scenarios: The New CNB Framework and Satellite Models for Property Prices and Credit," Research and Policy Notes 2021/01, Czech National Bank.

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