The Methodology of Stress Tests for the Kazakh Banking System
AbstractIn this paper, we describe the results for the section “Stress Testing Methodology forKazakh Banking System” which is part of the “Development of an Early Warning Systemfor Kazakhstan” project. The participating Kazakh institutions are the National Bank ofKazakhstan (NBRK), the Financial Supervisory Agency (FSA) and the National AnalyticalCentre of the Government and the National Bank of Kazakhstan (NAC). In this section,we apply different methodologies for developing stress testing tools for the Kazakhbanking system: the “bottom-up” and “top-down” approaches. The “bottom-up” approachis based on questionnaires we have transmitted to Kazakh banks asking them to calculatetheir own risk positions under stress. The collected results and the analyses show thatbanks tend to underestimate the decline in real estate prices and to overestimate currencydevaluation. In the “top-down” approach, we apply methodologies for portfolio andmacro stress tests to raw data collected by FSA and estimate the impact of the externalmacroeconomic shocks on the expected losses of financial institutions. In the portfoliostress test, the change in the expected losses under stress ranges between 34 percent and86 percent relative to the unconditional expected losses. In the macro stress test, we findan average change of 26 percent in the ratio of bad loans to total loans under stressscenario 1 and an average change of 80 percent under scenario 2 relative to the baselinescenario.
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 InfoPaper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper Nr. 85.
Date of creation: 2010
Date of revision:
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.:
- Pesola, Jarmo, 2001. "The role of macroeconomic shocks in banking crises," Research Discussion Papers 6/2001, Bank of Finland.
- Sorge, Marco & Virolainen, Kimmo, 2006. "A comparative analysis of macro stress-testing methodologies with application to Finland," Journal of Financial Stability, Elsevier, vol. 2(2), pages 113-151, June.
- repec:onb:oenbwp:y:2002:i:3:b:3 is not listed on IDEAS
- Mario Quagliariello, . "Banks' Performance over the Business Cycle: A Panel Analysis on Italian Intermediaries," Discussion Papers 04/17, Department of Economics, University of York.
- Scheicher, Martin & Kalirai, Harvir, 2002. "Macroeconomic Stress Testing: Preliminary Evidence for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.
- Darren Pain, 2003. "The provisioning experience of the major UK banks: a small panel investigation," Bank of England working papers 177, Bank of England.
- Virolainen , Kimmo, 2004. "Macro stress testing with a macroeconomic credit risk model for Finland," Research Discussion Papers 18/2004, Bank of Finland.
- Klaus Duellmann & Martin Erdelmeier, 2009. "Crash Testing German Banks," International Journal of Central Banking, International Journal of Central Banking, vol. 5(3), pages 139-175, September.
- Glenn Hoggarth & Steffen Sorensen & Lea Zicchino, 2005. "Stress tests of UK banks using a VAR approach," Bank of England working papers 282, Bank of England.
- Petr Jakubik & Christian Schmieder, 2008. "Stress Testing Credit Risk: Is the Czech Republic Different from Germany?," Working Papers 2008/9, Czech National Bank, Research Department.
- repec:fth:bfdipa:6/2001 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.