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Credit risk management through stress testing during the Covid-19 crisis: case of Banque Exterieure d’Algerie

Author

Listed:
  • Amira Benachour

    (Ecole Superieure De Commerce, Algiers, Algeria)

  • Hanane Abdlemalek

    (Ecole Superieure De Commerce, Algiers, Algeria)

  • Lamine Tarhlissia

    (Ecole Superieure De Commerce, Algiers, Algeria)

Abstract

This article examines the impact of stress tests on the financial stability of BEA-Banque, with the primary objective of assessing the bank’s resilience to macroeconomic and microeconomic shocks. The methodology relies on ordinary least squares (OLS) estimation to establish a long-term relationship between non-performing loans (NPL) and several macroeconomic variables, including inflation, exchange rates, and gross domestic product (GDP), as well as bank-specific variables such as size, ROA, and total credits. The results show that inflation and exchange rates significantly affect the level of NPLs. An increase in inflation is correlated with a rise in NPLs, while an appreciation of the exchange rate has an inverse impact. In terms of microeconomic indicators, ROA negatively influences NPLs, whereas total credits have a positive effect. The applied stress tests indicate that the quality of BEA-Banque’s loan portfolio deteriorates under extreme scenarios, particularly when inflation rises simultaneously with a depreciation of the currency. Nevertheless, the bank’s solvency ratio remains above the regulatory threshold set by the Central Bank of Algeria (9.5%), attesting to its financial strength.

Suggested Citation

  • Amira Benachour & Hanane Abdlemalek & Lamine Tarhlissia, 2025. "Credit risk management through stress testing during the Covid-19 crisis: case of Banque Exterieure d’Algerie," Journal of Financial Studies, Institute of Financial Studies, vol. 10(18), pages 9-29, May.
    • Handle: RePEc:fst:rfsisf:v:10:y:2025:i:18:p:9-29
    DOI: 10.55654/JFS.2025.10.18.01
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    References listed on IDEAS

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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