Stress Test Verification as Part of an Advanced Stress-Testing Framework
In: CNB Financial Stability Report 2009/2010
This article summarises the CNBâ€™s updated banking sector stress-testing methodology and presents the results of a verification of that methodology. The verification, conducted at the end of 2009, is based on a comparison of the actual values of key banking sector variables â€“ in particular the capital adequacy ratio â€“ with predictions generated by the stress-testing models. The objective of the verification is to examine to what extent the assumptions of the CNBâ€™s stress tests and the settings of the sub-models used are in line with reality. The results show that the current stress tests err on the right â€“ i.e. pessimistic â€“ side and slightly overestimate the risks. This leads on average to capital adequacy ratio estimates that are lower (more conservative) than the actual values. The article also identifies some areas of further development of the banking sector stress tests, for instance the use of verification as a standard part of the stress-testing framework in order to refine the stress tests.
|This chapter was published in: Adam Gersl & Jakub Seidler CNB Financial Stability Report 2009/2010, , chapter Thematic Article 1, pages 92-101, 2010.|
|This item is provided by Czech National Bank, Research Department in its series Occasional Publications - Chapters in Edited Volumes with number fsr0910/1.|
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- Martin ÈIHÁK & Jaroslav HEØMÁNEK & Michal HLAVÁÈEK, 2007. "New Approaches to Stress Testing the Czech Banking Sector (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 41-59, March.
- 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.
- Thomas Breuer & Martin Jandacka & Klaus Rheinberger & Martin Summer, 2009.
"How to Find Plausible, Severe and Useful Stress Scenarios,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 5(3), pages 205-224, September.
- Thomas Breuer & Martin Jandacka & Klaus Rheinberger & Martin Summer, 2009. "How to find plausible, severe, and useful stress scenarios," Working Papers 150, Oesterreichische Nationalbank (Austrian Central Bank).
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