Liquidity Scenario Analysis in the Luxembourg Banking Sector
AbstractThis paper aims to develop the basis for an approach to measure the liquidity risk sensitivity of banks in Luxembourg and to test it on real banking sector data. For this purpose we have developed four different scenarios: run on a bank, use of committed loans by counterparties, netting of the position with the parent financial group and changes in conditions of refinancing operations with the Eurosystem. The impact of all four simulations is measured by relative changes of liquidity ratios that have been introduced for this purpose. In a second step, this methodology is tested on a sample of 32 banks active in the Luxembourg banking sector aiming at identifying the most severe scenario or a combination of scenarios and the most vulnerable banks of the sample.
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Bibliographic InfoPaper provided by Central Bank of Luxembourg in its series BCL working papers with number 41.
Length: 56 pages
Date of creation: Sep 2009
Date of revision:
Contact details of provider:
Web page: http://www.bcl.lu/
Liquidity risk; Scenario analysis; Banking sector; Stress testing;
Find related papers by JEL classification:
- 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.:
- Petr Jakubík & Jaroslav Heřmánek, 2008.
"Stress testing of the czech banking sector,"
Prague Economic Papers,
University of Economics, Prague, vol. 2008(3), pages 195-212.
- Franco Stragiotti, 2009. "Stress testing and contingency funding plans: an analysis of current practices in the Luxembourg banking sector," BCL working papers 42, Central Bank of Luxembourg.
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