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Dynamic Stress Testing: The Framework for Testing Banking Sector Resilience Used by the Czech National Bank

Author

Listed:
  • Adam Gersl
  • Petr Jakubik
  • Tomas Konecny
  • Jakub Seidler

Abstract

This paper describes the current stress-testing framework used at the Czech National Bank to test the resilience of the banking sector. Macroeconomic scenarios and satellite models linking macroeconomic developments with key risk parameters and assumptions for generating dynamic stock-flow consistent behavior of individual bank balance-sheet items are discussed. Examples from past CNB Financial Stability Reports are given and an emphasis is put on conservative calibration of the stress-testing framework so as to ensure that the impact of adverse scenarios on the banking sector is not underestimated.

Suggested Citation

  • Adam Gersl & Petr Jakubik & Tomas Konecny & Jakub Seidler, 2012. "Dynamic Stress Testing: The Framework for Testing Banking Sector Resilience Used by the Czech National Bank," Working Papers 2012/11, Czech National Bank, Research Department.
  • Handle: RePEc:cnb:wpaper:2012/11
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    File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2012_11.pdf
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    References listed on IDEAS

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    2. Adam Gersl & Jakub Seidler, 2012. "How to Improve the Quality of Stress Tests through Backtesting," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 325-346, August.
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    5. Adam Gersl & Petr Jakubik, 2010. "Procyclicality of the Financial System and Simulation of the Feedback Effect," Occasional Publications - Chapters in Edited Volumes,in: CNB Financial Stability Report 2009/2010, chapter 0, pages 110-119 Czech National Bank, Research Department.
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    Citations

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    Cited by:

    1. Zlatuse Komarkova & Marek Rusnak & Hana Hejlova, 2016. "The Relationship between Liquidity Risk and Credit Risk in The CNB's Liquidity Stress Tests," Occasional Publications - Chapters in Edited Volumes,in: CNB Financial Stability Report 2015/2016, chapter 0, pages 127-136 Czech National Bank, Research Department.
    2. Josef Brechler & Vaclav Hausenblas & Zlatuse Komarkova & Miroslav Plasil, 2014. "Similarity and Clustering of Banks: Application to the Credit Exposures of the Czech Banking Sector," Research and Policy Notes 2014/04, Czech National Bank, Research Department.
    3. Zlatuse Komarkova & Marcela Gronychova, 2012. "Models for Stress Testing in the Insurance Sector," Research and Policy Notes 2012/02, Czech National Bank, Research Department.
    4. repec:bis:bisifc:46-14 is not listed on IDEAS
    5. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath.

    More about this item

    Keywords

    Banking sector; credit risk; stress tests.;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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