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Systemic Risk Modelling System (SRMS): a macroprudential stress testing model

Author

Listed:
  • Laurynas NaruÅ¡eviÄ ius

    (Financial Stability Department, Bank of Lithuania)

  • Ieva MikaliÅ«naitÄ—-Jouvanceau

    (Financial Stability Department, Bank of Lithuania)

Abstract

This paper introduces the Systemic Risk Modelling System (SRMS), a new macroprudential stress testing model for the Lithuanian banking sector. The SRMS addresses the limitations of traditional static models by incorporating dynamic balance sheet assumptions and capturing second-round effects, providing a more comprehensive assessment of systemic risks. The model’s applications extend beyond stress testing, including macroprudential policy stance assessment, capital-at-risk analysis, and macroprudential policy impact evaluation. The SRMS model enhances the understanding of systemic risks within the Lithuanian banking sector and offers a potential benchmark for other national central banks seeking to strengthen their financial stability frameworks.

Suggested Citation

  • Laurynas NaruÅ¡eviÄ ius & Ieva MikaliÅ«naitÄ—-Jouvanceau, 2025. "Systemic Risk Modelling System (SRMS): a macroprudential stress testing model," Bank of Lithuania Discussion Paper Series 41, Bank of Lithuania.
    • Handle: RePEc:lie:dpaper:41
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    More about this item

    Keywords

    macroprudential stress testing; macroprudential policy; feedback loop; secondround effects;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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