IDEAS home Printed from https://ideas.repec.org/a/ris/jofipe/0018.html

Stress-Testing Banks’ Profitability: The Case of French Banks

Author

Listed:
  • Jerome Coffinet

    (Banque de France)

  • Surong Lin

    (Banque de France)

Abstract

We propose a stress-testing framework to evaluate the sensitivity of banks’ profitability to plausible but severe adverse macroeconomic shocks. Specifically, we test the resilience of French banks’ profitability over the period 1993–2009. First, we identify the macroeconomic and financial variables (GDP growth, interest rate maturity spread, stock market’s volatility) and bank-specific variables (size, capital ratio, ratio of noninterest income to assets) that significantly determine banks’ profitability. Second, we propose macroeconomic stress-testing exercises showing that French banks’ profitability is resilient to major adverse macroeconomic scenarios. Specifically, our findings highlight that even severe recessions would leave the French banking system profitable.

Suggested Citation

  • Jerome Coffinet & Surong Lin, 2013. "Stress-Testing Banks’ Profitability: The Case of French Banks," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(2), pages 67-80.
    • Handle: RePEc:ris:jofipe:0018
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Belloni & Maciej Grodzicki & Mariusz Jarmuzek, 2024. "Why European banks adjust their dividend payouts?," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(3), pages 284-304, September.
    2. Kanas, Angelos & Molyneux, Philip, 2018. "Macro stress testing the U.S. banking system," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 204-227.
    3. Busch, Ramona & Koziol, Philipp & Mitrovic, Marc, 2015. "Many a little makes a mickle: Macro portfolio stress test for small and medium-sized German banks," Discussion Papers 23/2015, Deutsche Bundesbank.
    4. Albert, Stéphane, 2015. "US bank holding companies: Structure of activities and performance through the cycles," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 253-269.
    5. Alexandra Horobet & Magdalena Radulescu & Lucian Belascu & Sandra Maria Dita, 2021. "Determinants of Bank Profitability in CEE Countries: Evidence from GMM Panel Data Estimates," JRFM, MDPI, vol. 14(7), pages 1-23, July.
    6. Busch, Ramona & Koziol, Philipp & Mitrovic, Marc, 2018. "Many a little makes a mickle: Stress testing small and medium-sized German banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 237-253.
    7. Vazquez, Francisco & Tabak, Benjamin M. & Souto, Marcos, 2012. "A macro stress test model of credit risk for the Brazilian banking sector," Journal of Financial Stability, Elsevier, vol. 8(2), pages 69-83.
    8. Lartey, Theophilus & James, Gregory A. & Danso, Albert, 2021. "Interbank funding, bank risk exposure and performance in the UK: A three-stage network DEA approach," International Review of Financial Analysis, Elsevier, vol. 75(C).
    9. Stéphane Albert & Hervé Alexandre, 2018. "Banks’ earnings: Empirical evidence of the influence of economic and financial market factors," Review of Financial Economics, John Wiley & Sons, vol. 36(2), pages 97-116, April.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:jofipe:0018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ms Alina Stefan The email address of this maintainer does not seem to be valid anymore. Please ask Ms Alina Stefan to update the entry or send us the correct address (email available below). General contact details of provider: http://www.ey.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.